Annual Report 2009 - static.j-l.comstatic.j-l.com/imce/annual_report_2009.pdf · Brazil, China, Japan, the Philippines, Singapore, Spain, and ... J. Lauritzen A/S, Annual Report 2009

Annual Report 2009

J. Lauritzen in brief

In April 2009, J. Lauritzen (JL) celebrated its 125 years anni-versary. JL has thus been servicing the maritime trade world-wide for several generations, confirming that our traditions, ambitions and know-how continue to create added value for our shareholders, customers, business partners and em-ployees.

“Together, we create a world-class shipping company” is our vision. A vision that requires constant commitment in our en-deavors to become world-class, whether working independ-ently or together with partners and business associates.

From head office in Copenhagen and our overseas offices in Brazil, China, Japan, the Philippines, Singapore, Spain, and USA, our vision links all JL employees together and ensures

that our values of Competence, Respect, Entrepreneurship, Accountability, Team Spirit and Enthusiasm form a vital part in our continuing aspirations to be a world-class business partner.

As a leader in international ocean transport, JL owns and op-erates a modern fleet of bulk carriers, gas carriers, product tankers and dynamically positioned support vessels servic-ing the offshore industry.

With a diversified newbuilding portfolio for all our business activities, JL will also in the future be able to meet rising de-mand for safe world-class services with “Oceans of know-how”.

J. Lauritzen A/S, Annual Report 2009

Contents

Management report

Group key figures 2

Highlights 2009 and outlook 2010 4

Investment programme 12

Lauritzen Bulkers 14

Lauritzen Kosan 20

Lauritzen Offshore Services 26

Lauritzen Tankers 32

Corporate Governance 38

Corporate Social Responsibility (CSR) 44

Organisation and People 52

Risk Management 56

Financial Review 64

Accounts

Statements and notes 68

Overall group structure 108

List of group companies 109

Endorsements

Management statement 110

The independent auditor’s report 111

Board of directors 112

Management 114

Company details 116


1

Group key figures

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250

300

350

2003 2004 2005 2006 2007

EBITDA EBIT Result for the year

Key figures have been calculated as follows:

Profit margin:Operating income x 100 Revenue

Solvency ratio: Total equity, year-end x 100 Total equity and liabilities, year-end

Return on equity:JL’s share of the result x 100JL’s average share of equity

Invested capital:Total assets less bank deposits, securities non operational assets and non interest-bearing current liabilities

Return on invested capital:

(Operating income + result in joint ventures) x 100 Average invested capital

SELECTED KEY FIGURES 2005-2009 USDm

REVENUES 2005-2009 USDm

CAPITAL STRUCTURE 2005-2009 USDm

CASH FLOW FROM OPERATIONS 2005-2009 USDm

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2005 2006 2007 2008 2009

EBITDA EBIT Result for the year

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2005 2006 2007 2008 2009Reefer a.o. Lauritzen Tankers Lauritzen OffshoreLauritzen Kosan Lauritzen Bulkers

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2,500

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Total equity Non-current liab. Current liab.

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350

2005 2006 2007 2008 2009

0100200300400500600700

2005 2006 2007 2008 2009

Lauritzen Bulkers Lauritzen Kosan Lauritzen Offshore

Lauritzen Tankers Reefer a.o.


2

USDm 2009 2008 2007 2006 2005

Revenue 483 666 657 460 592

Result before depreciation (EBITDA) 135 159 262 100 187

Profit and loss on sale of vessels 17 146 79 44 53

Operating income (EBIT) 76 170 305 117 214

Net result in joint ventures 17 27 24 10 18

Result of financial items (17) (38) 23 9 (0)

Result before tax 76 159 352 136 232

Result for the year 80 155 347 126 210

Minority shareholders' share of the result (5) (5) (6) (2) (1)

The J. Lauritzen Group's share of the result 75 149 341 124 209

Non current assets 1,671 1,399 1,101 714 450

- hereof vessels under construction 445 659 496 211 72

Current assets 518 368 303 216 375

- hereof cash and securities 218 180 195 155 317

Total assets 2,188 1,768 1,405 930 825

Share capital 61 61 61 61 61

JL's share of equity 1,126 1,043 991 680 606

Non current liabilities 886 413 43 62 91

Current liabilities 172 307 366 181 120

Cash flow from operating activities (24) 300 191 80 217

Cash flow from investment activities (455) (237) (307) (137) (162)

- hereof investments in vessels, machinery and equipm. (541) (714) (545) (369) (157)

Cash flow from financing activities 508 290 (37) (68) (103)

Changes for the year in liquid assets 29 353 (153) (125) (48)

Cash and cash equivalents 172 144 (209) (56) 70

Average number of employees 748 662 575 839 704

DKK exchange rate year end 519 528 508 566 632

Average DKK exchange rate 536 510 544 595 600

Group key figures

Profit margin 15.7% 25.6% 46.4% 25.6% 36.2%

Solvency ratio 52% 59% 71% 74% 74%

Solvency ratio (JL's share of equity) 51% 59% 71% 73% 74%

Return on equity 6.9% 14.7% 40.9% 19.3% 39.8%

Return on invested capital 6.1% 17.1% 38.4% 25.7% 60.5%


3

Highlights 2009 and outlook 2010In a year of global recession and a sharp drop in international trade and seaborne transports, JL’s share of results totalled USD 74.6m in 2009 compared to USD 149.5m in 2008, cf. Figure 1.

Return on invested capital was 6.1% com-pared to 17.1% in 2008.

Results were better than expected and acceptable in the light of the difficult trad-ing conditions.

The business environmentThe international financial crisis that emerged in late 2008 continued into 2009 and developed into a deep world eco-nomic recession with severe impacts on the shipping industry. After plummet-ing freight markets in the last few months of 2008, the following characterized JL’s main markets in 2009:

• Freight rates bottomed out in the dry bulk market during the first quarter with huge volatility during the year.

• Freight rates for product tankers start-ed the year at reasonable levels but dropped to lay-up levels during the sec-ond quarter.

• Freight rates for smaller gas carriers were fairly flat at reasonable levels, whereas spot market rates for ethylene carriers declined over the year, albeit from very high levels.

• The offshore market saw a slight decline. However with oil prices rising, business seemed to pick up towards the end of the year.

Deliveries of new tonnage were generally lower than anticipated, mainly due to slip-page. The greatest impact was felt in the dry bulk sector with actual deliveries 35% down on scheduled compared to 25% for smaller gas carriers and for product tank-ers respectively.

The prime reason for the difference in de-livery outcomes was that product tankers and gas carriers had been ordered at an earlier stage than bulk carriers and were thus further into their delivery schedules than bulk carriers.

In addition to supply changes, the fiscal initiatives taken to combat the economic crisis have tended to favour the dry bulk markets, inasmuch as the emerging mar-kets, mainly China and India, increased their imports of commodities.

Newbuilding prices came under pressure as a result of the steep decline in new or-ders and this had a negative impact on second-hand prices in addition to the im-pact from earnings.

JL GroupIn April 2009, JL celebrated its 125 years anniversary. During the year, JL succeed-ed in establishing even closer ties with long-term customers and business rela-tions were also established with new cus-tomers.

JL’s growth strategy, including its consid-erable investment programme, was chal-lenged by the changes in the internation-


4

FIG 1: RESULT FOR THE YEAR USDm

-100

-50

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200

Bulk Gas Offshore Tank

Result before tax Tax a.o. Result for the year

2008 2009


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1200

2010 2011 2012 2013

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2010 2011 2012 2013

Year-end 2008 Year-end 2009

FIG 2: INVESTMENT PROGRAMME BY YEAR OF DELIVERY USDm


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al business and financial environment. JL took prompt measures to protect its busi-ness through planned redelivery of time-charter tonnage and worked successfully with the shipyards to restructure the new-building programme, cf. Figure 2.

Sixteen newbuildings in all were added to the controlled fleet, including nine bulk carriers, five gas carriers, and one prod-uct tanker. An Accommodation and Sup-port Vessel was also delivered after exten-sive conversion.

Finance was arranged in 2009 for the de-livery of newbuildings stretching into 2011, not only through JL’s lead banks, but also through new sources of finance including export credit agencies with loans ranging from three to twelve years.

The strategic “Must-win Battle” concept was introduced in 2009 focusing on the critical challenges of sustaining JL’s suc-cess.

Due to the growing strategic importance of health and safety and environmental is-sues, technical fleet management previ-ously operated centrally by Lauritzen Fleet Management was transferred to the indi-vidual business units at January 1st 2009. A technical committee was established with representatives from each business unit to ensure coordination of technical is-sues and to share best practice.

To support JL’s growing offshore activi-ties in Brazilian waters, a new office was opened in Rio de Janeiro, Brazil, with an-

other in Manila, Philippines, with the aim of strengthening important business rela-tions with crewing agencies and to facili-tate knowledge-sharing and best practice among crews.

Jan Kastrup-Nielsen, the president of Lauritzen Kosan, was also appointed president of Lauritzen Tankers during the year and took over responsibility for JL’s product tanker activities from Anders Mortensen, who became president of Lauritzen Offshore Services. Jan Kastrup-Nielsen was also promoted to Executive Vice President and became member of the Executive Management together with Torben Janholt and Birgit Aagaard-Svendsen. Ejner Bonderup was appointed president of Lauritzen Bulkers after Jens Ditlev Lauritzen, who left JL after being appointed chairman of Lauritzen Fonden.

Assets and solvencyJL’s order book of own vessels at year-end 2009 represented a total value of USD 1,656m, down from USD 2,400m at year-end 2008, mainly due to deliveries during the year. A considerable proportion of the order book enjoys long-term employment contracts.

During 2009, investments in fleet expan-sion amounted to USD 534.0m com-pared to USD 707.1m in 2008. Divest-ments totalled USD 91.6m compared to USD 423.6m in 2008. Total invested capi-tal was USD 1,813.7m at year-end 2009, up from USD 1,225.1m at year-end 2008, cf. Figure 3.


7

At the end of 2009, JL’s newbuilding port-folio comprised a total of 38 wholly-owned vessels, including 21 bulk carriers, six gas carriers, nine product tankers, and two dynamically positioned shuttle tankers for delivery 2010-13. Partners will commit an-other 3 newbuildings to the fleet control-led by JL.

During 2009, JL controlled a combined average fleet of 140 vessels compared to 135 vessels in 2008.

JL’s investment programme is self-fund-ed during the construction process and credit lines are in place covering deliver-ies into 2011.

At year-end 2009, the solvency ratio was 52% compared to 59% at year-end 2008.

Lean and skilled organisationImplementation of LEAN processes con-tinued in 2009 under “Project World-Class” with the aim of permanently streamlining our organisation and busi-ness procedures. Since its introduction in 2007, efficiency gains have amounted to approximately 10% in business and cor-porate units where LEAN processes have been applied.

Skills and competencies amongst per-sonnel at sea and ashore continue to sup-port JL’s world-class vision.

Outlook for 20102010 will be a critical year for the world economy and international trade. The easing of financial policies is likely to be reversed as the room for further fiscal ini-tiatives has narrowed considerably in view of rising public debt in many countries. Low interest rates are unlikely to be main-tained unless the deflationary scenario develops. Signs of rising protectionism may also have to be contained if shipping is to prosper.

Whereas there seem to be many difficult issues, developments in consumer confi-dence, in business sentiment and expec-tations for future developments suggest that the world economy is recovering and that 2010 may witness economic growth with the possibility of ending rising unem-ployment.

In this environment, international trade and shipping is bound to grow. Product tank-ers and bulk carriers are seeing sizeable growth in demand early in 2010, where-as the trends for gas carrier demand are slightly more subdued.

Order books are at present large in rel-ative terms and despite slippage, fleet growth in all shipping markets will be high. Scrapping will be an important issue, par-ticularly for tankers with the approaching deadline for single-hull phase-out.


8

FIG 3: INVESTED CAPITAL YEAR-END USDm

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1600

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Bulk Gas Offshore Tank JL

2008 2009


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10

During 2010, JL is expecting to take de-livery of two Capesize bulk carrier new-buildings, both covered by long-term con-tracts, and six Handysize newbuildings. Three pressurized gas carrier newbuild-ings and three product tanker newbuild-ings will also be added to the fleet.

Freight rate volatility is expected to be high in all shipping markets. The dry bulk mar-ket is expected to enjoy relatively strong levels during the first half of the year. Tank-er markets are likely to experience difficult freight markets for most of the year due to large inventories including floating stor-age, with some strengthening possible towards the end of the year. The smaller gas carrier segment is expected to be ex-posed to a slight downward pressure on rates in the first part of the year, unadjust-ed for seasonal fluctuations. Forecast oil price levels combined with the focus on energy supply security are expected to

boost already strong demand growth for dynamically positioned support vessels.

In early 2010, a considerable amount of forecast revenues are secured by con-tracts and as a result of positive, albeit volatile, market trends, revenues are ex-pected to increase significantly. Apart from financing costs, costs are expect-ed to increase more slowly and therefore cash generating EBITDA is expected to be USD 160-175m and thus considerably higher than in 2009. The cost of finance is expected to increase due to rising debt associated with deliveries during the year.

Net results for 2010 are expected to be USD 45-60m, down on 2009 due to the reversal of provisions and write-downs in-cluded in 2009 results. When excluding such one-off items, the results for 2010 are expected to be significantly better than those reported in 2009.


11

Investment programme

Type dwt Delivery Type dwt Delivery

Lauritzen Bulkers A/SHandysize 32,500 01-2010 Handymax 58,000 01-2010Handysize 31,800 01-2010 Handymax 58,372 01-2010Handysize 32,500 03-2010 Handymax 58,000 03-2010Handysize 32,500 07-2010 Handymax 58,000 04-2010Handysize 32,500 10-2010 Handymax 58,000 05-2010Handysize 31,800 09-2010 Handysize* 32,500 05-2010Capesize 180,000 09-2010 Capesize 180,000 07-2010Capesize 180,000 11-2010 Handysize 33,000 08-2010Handymax 58,100 01-2011 Handysize* 32,500 01-2011Handysize 31,800 03-2011 Handysize 32,700 03-2011Capesize 180,000 03-2011 Handymax 61,000 04-2011Capesize 180,000 05-2011 Handysize 28,000 06-2011Handymax 58,100 04-2011 Handysize 33,000 08-2011Handymax 58,100 06-2011 Handymax 61,000 10-2011Handymax 58,100 09-2011 Handysize* 38,000 12-2011Capesize 180,000 09-2011 Handymax 58,000 12-2011Handysize 31,800 10-2011 Handymax 58,000 01-2012Handysize 38,000 12-2011 Handysize 28,000 02-2012Handysize 38,000 05-2012 Handymax 58,000 02-2012Handysize 38,000 06-2012 Handymax 58,000 05-2012Handysize 31,800 10-2013

* Partners

Type cbm Delivery

Lauritzen Kosan A/SFully pressurized 3,678 06-2010Fully pressurized 3,678 08-2010Fully pressurized 3,678 12-2010Fully pressurized 3,678 03-2011Fully pressurized 3,678 07-2011Fully pressurized 3,678 09-2011

Type dwt Delivery

Lauritzen Tankers A/SProduct MR 53,000 02-2010Product MR 53,000 03-2010Product MR 50,500 10-2010Product MR 50,500 04-2011Product MR 50,500 06-2011Product MR 50,500 03-2012Product MR 50,500 05-2012Product MR 50,500 03-2013Product MR 50,500 05-2013

Type dwt Delivery

Lauritzen Offshore ServicesShuttle tank 59,000 06-2011Shuttle tank 59,000 12-2011

Own vessels

Own vessels Time charters and through partners

Own vessels

Own vessels


12


13

Lauritzen Bulkers

FIG 4: 12 MONTHS PERIOD RATES 2007-09 USD ‘000/DAY

Source: Clarkson Research Services

0

50

100

150

200

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09

Capesize Panamax Handysize

KEY FIGURES USDm

2009 2008

Revenue 270.7 432.7EBITDA 117.4 120.8Depreciation and write-downs 18.4 (100.2)Profit on sale of vessels 17.0 117.0Operating income 152.8 137.6Result in joint ventures 19.6 26.0Finance net (4.4) (6.6)Result before tax 168.0 157.0JL's share of the result 167.5 157.0

Invested capital (average) 598.0 414.5Return on invested capital 28.8% 39.5%Average no. of employees 45 42


14

In 2009, Lauritzen Bulkers’ net results amounted to USD 167.5m compared to USD 157.0m in 2008. The collapse of the bulk carrier markets in late 2008 was then expected to have an impact on the mar-ket in coming years and thus the 2008 re-sults included provisions and write-downs on vessels, including vessels under con-struction, totaling USD 192.7m. The fig-ures for 2009 include use and reversals of provisions some of which relate to subse-quent years and reversal of write-downs on vessels due to the recovery of the mar-ket in 2009 totaling USD 135.5m.

When adjusted for one-off items such as reversal of write-downs and provisions and for gains of USD 17.0m from the dis-posal of vessels and other assets, net re-sults for 2009 amounted to USD 15.0m, significantly lower than the similarly ad-justed figure of USD 232.7m in 2008.

Results were better than expected and acceptable in view of the depressed and volatile trading conditions during the year.

Main eventsDespite the difficult trading conditions, Lauritzen Bulkers enjoyed strong custom-er loyalty and was successful in attract-ing important new customers during the year.

The tonnage renewal process continued as part of the tonnage strategy aimed at controlling a modern, fuel-efficient, versa-tile fleet. During the year Lauritzen Bulk-ers took delivery of three Capesize bulk carrier newbuildings, and one Handysize newbuilding. Five time-chartered vessels were also added to the fleet, including

three newbuildings and two second-hand vessels.

Pool partners contributed two additional Handysize newbuildings to the controlled fleet and Genco Shipping & Trading Ltd. became a new member of the Handysize pool founded by Lauritzen Bulkers and Is-land View Shipping.

Five Handysize bulk carriers and one Handymax bulk carrier were sold and ten long-term time-chartered bulk carriers were redelivered as planned.

Lauritzen Bulkers satisfactorily managed to adjust its newbuilding portfolio dur-ing the year in conjunction with the ship-yards.

Global market developments2009 was a very volatile year with the Bal-tic Dry Index (BDI) ranging from 772 at the beginning of the year to 4,660 in mid No-vember. Average earnings fell across all vessel sizes compared to 2008 although the trend during the year was upward, cf. Figure 4.

Demand for bulk carriersThe most significant market development in 2009 was the dramatic decline in trade in the Atlantic Basin coinciding with strong growth both in the Pacific Basin and in the cross trade between the Atlantic and Pa-cific basins, as the dry bulk trade became even more driven by the Asian econo-mies.

In volume terms, world demand for sea-borne dry bulk trade fell by 1% in 2009 compared to 3% growth in 2008. A signifi-


15

cant rise in port congestion meant that av-erage fleet efficiency declined which con-tributed to demand growth in dwt terms of the order of 4%.

The driving force between the compara-tively favourable development in demand in 2009 was a considerable rise in Chi-nese imports of iron ore and coal. Thus total iron ore movements in 2009 went up by an estimated 8% compared with 2008, whereas most other commodities fell. The decline in coal movements is estimated at around 1%. Minor bulks including baux-ite/alumina and phosphate rock are esti-mated to have fallen by 8-9% with steel products, cement and other commodities with a high degree of cyclicality leading the way, cf. Figure 5.

Supply of bulk carriersThe world dry bulk fleet increased by 10% in 2009 to 460m dwt. Fleet growth was due to deliveries of 43m dwt, conver-sions of tankers into bulk carriers amount-ing to 8m dwt and scrapping of 10m dwt. About one half of deliveries took place in the Capesize segment, whereas almost half of the scrapped vessels were in the Handysize segment.

Contracting fell from 98m dwt in 2008 to 21m dwt in 2009. Significant uncertainty characterizes the actual size of the current order book and its delivery schedule, due in part to cancellations and slippage and partly due to conversion of orders from one vessel type to another. Recent con-tracting with fairly early delivery schedules suggests that the latter factor is at play.

Scheduled deliveries will amount to 122m dwt in 2010 and 94m dwt in 2011 cf. Fig-ure 6 but it is generally expected that de-liveries will be of the order of 63m dwt in 2010 and 63m in 2011.

Lauritzen Bulkers’ fleetLauritzen Bulkers aims to secure high for-ward coverage for larger bulk carriers, with more exposure to the spot market for Handysize bulk carriers. Thus, high con-tract coverage has been secured in the Capesize, Panamax and Handymax seg-ments, whereas contract coverage for Handysize is limited, albeit at a higher lev-el than in the past few years.

In 2009, Lauritzen Bulkers’ total number of ship days reached 28,655 with 78.5 vessels on average, 4% up on the figure reported in 2008, cf. Figure 7.

Lauritzen Bulkers’ fleet of Handysize bulk carriers, including owned, part-owned, time-chartered and partner tonnage, av-eraged 63 vessels compared to 62 ves-sels in 2008 with Island View Shipping as the major pool partner. At year-end 2009, the combined Handysize fleet comprised 53 vessels.

On average, the Handymax fleet in 2009 comprised 7.8 vessels compared to 6.8 vessels in 2008, with a further 5.1 Pan-amax vessels (4.2 in 2008), and 2.8 Cape-size vessels (2.4 in 2008).

At year-end 2009, Lauritzen Bulkers oper-ated 22 long-term time-chartered vessels, with purchase options for five of these, in


16

FIG 5: STRUCTURE OF DEMAND BY COMMODITY IN 2008 & 2009


27%

9%

5%6%

3%

26%11%3%1%

3%

3%

3%

9%

Iron ore Coal Grains Bauxite/alumina

Phosphate rock Fertilizers Scrap Cement

Steel products Agribulks Forest products Other

30%8%

6%5%

3%

26%10%2%

1%3%

3%3%




30%8%

6%5%

3%

26%10%2%

1%3%

3%3%





17

0

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2008 2009

Other Shared charter Chartered Part owned Own


FIG 7: AVERAGE NUMBER OF VESSELS

51122

63

94

48

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350

2005 2006 2007 2008 Estimated deliveries 2009 incl.

conversions

Order book year-end

2009

Expected deliveries

incl. conversions

2010

2009 2010 2011 2012 2013 2014 Total order book

FIG 6: BULK CARRIER ORDER BOOK DWTm 2005-092008-09 by scheduled delivery year and estimated deliveries


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addition to its fleet of owned vessels.

The wholly-owned fleet comprised nine vessels at the end of 2009 (12 in 2008) with Lauritzen Bulkers having part owner-ship of a further 22 vessels (18 in 2008).

Fleet managementTechnical management including crew-ing for Lauritzen Bulkers’ fleet of own bulk carriers was undertaken by part-owned New Century Overseas Management Inc., Manila (NCO), a subsidiary of Good Hope Overseas Management Inc., and by Fleet Management Ltd., Hong Kong. During the year, Fleet Management Ltd. received the Lloyd’s List “Asian 2009 Ship Manager of the Year” award as well as the Seatrade Asia “Ship Manager of the Year” award.

Off-hire for Lauritzen Bulkers’ own fleet, including scheduled dry docking was 1.5%.

Prospects for 2010The general consensus for 2010 seems to indicate that the market will maintain a reasonable level during the first quar-ters, as cancellations, non-performance and slippage will delay deliveries. With demand for bulk carriers recovering and China targeting fast development of the country, high imports of iron ore as well as coal will support demand growth.

2010 is expected to show relatively strong spot market rates during the first half, with

these gradually leveling off during the sec-ond half as higher numbers of new deliv-eries enter the market. However, consid-erable freight market volatility is expected, particularly in the larger segments due to their dependency upon iron ore imports into China.

In 2010, Lauritzen Bulkers will take deliv-ery of two Capesize newbuildings, both chartered out on long-term contracts, and six Handysize newbuildings plus one ad-ditional second-hand Handysize bulk car-rier.

One Capesize newbuilding (chartered out on long-term time-charter) as well as five Handymax newbuildings and one Handy-size newbuilding will enter the fleet in 2010 on long-term time-charter.

Contract coverage for Capesize bulk car-riers, including deliveries during the year, is 100% for 2010. Likewise, coverage for Panamax is 100%, Handymax 81% and Handysize 40%.

In 2010, Lauritzen Bulkers’ net results are expected to be significantly lower than in 2009. However, adjusted for one-off items such as reversal of provisions and write-downs and less gains on the disposal of vessels included in the 2009 results, re-sults in 2010 are expected to be better than those reported in 2009.


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Lauritzen Kosan Net results were USD 9.2m in 2009 com-pared to USD 37.9m in 2008. The decline was mainly due to the weaker trading con-ditions for gas carriers and smaller gains from the sale of vessels, down USD 18.7m compared to 2008.

Results were in line with expectations and considered acceptable in view of the gen-eral trading conditions.

Main eventsLauritzen Kosan continued its fleet build-up in the market for maritime transporta-tion of petrochemical gases and four ad-ditional 8,000 cbm ethylene gas carriers from Sekwang Heavy Industries, Korea entered the fleet, two of which owned by J. Lauritzen Singapore Pte. Ltd. and two by pool partner LGR di Navigazione S.p.A of Naples, Italy, completing the series of ten identical vessels. With three additional part-owned 9,000 cbm ethylene carriers, delivered in 2008, a solid platform with 13 modern units has been established in the ethylene carrier segment.

Pool partner LGR di Navigazione also con-tributed one 4,000 cbm semi-refrigerated (S/R) newbuilding to the controlled fleet.

A purchase option for the 1994-built, 5,638 cbm S/R gas carrier Telma Kosan was declared for delivery in 2010.

With the agreement of the builders, two pressurized gas carriers scheduled for delivery in 2010 were postponed to 2011.

A contract was made with Shell Chemi-cals, Singapore, for inter-Asian distribu-tion of ethylene to start in 2010. Due to the

increasing importance of the Asian mar-ket for transporting petrochemical gas-ses, a decision was made to strengthen the commercial organisation in Singapore in 2010.

During the year, Lauritzen Kosan chaired one of the working groups tasked with re-viewing and revising IMO’s International Code for the Construction and Equipment of Ships Carrying Liquefied Gases in Bulk (IGC Code).

Global market developments Spot market rates for ethylene carriers in the 8,000-10,000 cbm segment weak-ened during the year by approximate-ly 20% compared to 2008, whereas the spot market for S/R 6,500 cbm and fully pressurized (F/P) 3,500 cbm gas carriers trading East of Suez, after some volatility, ended the year at the same level as end of 2008, cf. Figure 8.

Period rates for ethylene carriers and smaller S/R gas carriers declined by about 15%, whereas F/P gas carriers of 3,500 cbm trading East of Suez, saw pe-riod rates decline by 5% in 2009.

Demand for gas carriers2009 was a difficult year for demand for the smaller gas carrier segment up to 20,000 cbm. Overall, world seaborne trade is esti-mated to have declined by about 9% dur-ing the year with LPG seeing sizeable vol-ume reductions, cf. Figure 9. The decline was to some extent counterbalanced by a huge rise in Chinese imports of VCM, pro-pylene and ethylene which overall led to an increase in movements of petrochemi-cal gases compared to 2008.


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FIG 8: SPOT RATES GAS CARRIERS USD ‘000/MONTH*

*) Unadjusted for waiting time if any

Source: Fearnleys Weekly

100

200

300

400

500

600

700

800

900


ETH 8,000 cbm ETH 10,000 cbmF/P 3,500 cbm (East of Suez)

KEY FIGURES USDm

2009 2008

Revenue 114.1 127.8EBITDA 34.6 44.0Depreciation (25.6) (20.7)Profit on sale of vessels 0.2 18.9Operating income 9.1 42.3Result in joint ventures 1.9 1.3Finance net (1.8) (4.9)Result before tax 9.2 38.7JL's share of the result 9.2 37.9

Invested capital (average) 459.6 432.2Return on invested capital 2.4% 10.1%Average no. of employees 354 254


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14%

20%

13%12%

10%

31%

Ammonia Ethylene Propylene Butadiene VCM LPG

14%

20%

16%12%

10%

28%


14%

20%

16%12%

10%

28%


Source: ViaMar AS

FIG 9: STRUCTURE OF DEMAND BY PRODUCT IN 2008 & 2009


22

Petrochemical gas prices were on a rising trend in 2009, due in part to rising feed-stock costs. During the year numerous opportunities for arbitrage emerged and this had a positive impact on demand for seaborne transportation of petrochemical gases.

The petrochemical industry is entering a period of re-structuring due to increasing surplus capacity which reflects the build-up of production capacity in the Middle East Gulf. This is likely to lead to the clo-sure of smaller, uncompetitive crackers in the OECD area, thereby creating rising demand for imports as cracker expansion in these areas is relatively costly.

Supply of gas carriers Fleet growth in the 3,000-20,000 cbm gas carrier segment was estimated to be about 7% in 2009, but slippage and higher demolition took actual fleet growth down to some 3% in 2009. Deliveries of ethylene carrying capacity are declining and fewer than half deliveries in 2009 had ethylene capacity. Scrapping amount-ed to nine units compared to six units in 2008 with an unchanged average scrap-ping age of 31 years.

The order book includes roughly 675,000 m3 carrying capacity, equivalent to about 20% of the existing fleet. Less than one fourth of vessels on order have ethylene carrying capacity.

New orders amounted to 70,000 cbm in 2009, of which none with ethylene capac-ity, down from 240,000 cbm in 2008. The ethylene order book amounts to some 15% of the existing fleet, the majority of which will be delivered next year cf. Fig-ure 10.

Another rise in scrapping seems likely due to a combination of age and increasing customer requirements with an addition-al associated impact on costs, particularly for older tonnage.

Lauritzen Kosan’s fleetLauritzen Kosan operates with a high pro-portion of coverage for the fleet through cargo contracts with a number of the eth-ylene carriers being employed on long-term time charter.

Lauritzen Kosan’s fleet comprised 29 ful-ly or part-owned and bareboat chartered vessels at year-end 2009. The average age of the company’s own fleet was 8.6 years compared to 7.6 years at year-end 2008.

On average the operated fleet consisted of 25 semi-refrigerated/ethylene gas car-riers (23 vessels in 2008) with a capacity of about 152,000 cbm.

Further, Unigas Kosan Ltd, Hong Kong, the 50:50 partnership with Othello Ship-ping, the Schulte Group and Sloman Nep-tun operated a fleet of 20 fully pressurized gas carriers in 2009, down from 21 ves-sels in 2008, with a combined capacity of about 74,000 cbm.

Total ship days reached 17,020 for 46.6 vessels on average compared to 16,077 days for the average of 43.9 vessels re-ported in 2008, cf. Figure 11. The increase in ship days reflected the increasing number of ethylene carriers employed.

Lauritzen Kosan is highly conscious of health and safety and environmental is-sues and complies with strict technical


23

and operational standards and proce-dures for the fleet. Customer inspections and vetting of vessels are conducted at regular intervals and the company works closely with customers to ensure that the fleet complies with their requirements. During 2009, the company’s fleet under-went close to 170 customer vetting in-spections.

Fleet ManagementAt January 1st 2009, technical fleet man-agement, previously undertaken by Lau-ritzen Fleet Management, was transferred to the individual business units and nowa-days Lauritzen Kosan Fleet Management is an integrated part of Lauritzen Kosan. The transfer was a natural consequence of the growing strategic importance of en-vironmental, health and safety issues in which Lauritzen Kosan customers take an active, direct interest.

Some of Lauritzen Kosan’s semi-refriger-ated gas carriers were technically man-aged by wholly-owned Gasnaval S.A., Bil-bao, whereas fleet management of the fully pressurized vessels was handled by part-owned Star Management Associ-ates, Tokyo.

Six scheduled dry-dockings were com-pleted during 2009 (nine in 2008). Sched-uled and unscheduled off-hire including scheduled dry-docking was 3.6% in 2009 compared to 3.9% in 2008.

Several initiatives are under way to ensure that high quality and safety levels can be

sustained and improved. In addition to continuous administrative improvements, the focus is on training and developing our crews. In 2009, an initiative was launched to strengthen office to vessel communica-tions and to ensure that seafarers are in the best position to carry out their work in line with our standards and values. A representative office in Manila was estab-lished to support this initiative and to fa-cilitate closer contact with our crews and crewing agent.

Prospects for 2010The prime drivers of demand for smaller gas carriers - sales of durable consumer goods and new construction - are recov-ering globally, albeit from a very low level. This means that whereas demand fore-casts for 2010 are fairly positive, the net fleet growth of close to 5% precludes an improvement in trading conditions in the first part of the year. As such, spot market rates are expected to remain under pres-sure with a high degree of volatility.

Lauritzen Kosan is scheduled to take de-livery of the three of the series of six iden-tical 3,600 cbm capacity pressurised gas carriers from China, cf. p. 12.

A significant part of total fleet capacity has been covered on time-charter con-tracts, which is expected to account for about 69% of total budgeted revenues for the year.

In 2010, Lauritzen Kosan’s results are ex-pected to be lower than in 2009.


24


FIG 10: ETHYLENE GAS CARRIER ORDER BOOK CBM ‘000 2005-09(2008-09 by scheduled delivery year and estimated deliveries)


20

40

60

0

20

2008 2009

Other Chartered Part owned Own

250

300

350

400

450

500

94183

125

0

50

100

150

200

250

2005 2006 2007 2008 E ti t d O d b k E t d2005 2006 2007 2008 Estimated deliveries

2009

Order book year-end

2009

Expected deliveries

2010

2009 2010 2011 Total order book


25

Lauritzen Offshore Services

FIG 12: GLOBAL SHUTTLE TANKER FLEET AND AGE PROFILE

Source: Lauritzen Offshore Services (own research)

13

14

50

60

70

80

(yea

rs)

sels

11

12

10

20

30

40

aver

age

age

No.

of v

es

100

2010 2011 2012 2013 2014

<<< Fleet <<< Order book

<<< Order book (questionable) Average age >>>

KEY FIGURES USDm

2009 2008

Revenue 22.0 1.7EBITDA 4.0 (0.1)Depreciation (5.2) (0.7)Profit on sale of vessels etc. 0.0 0.0Operating income (1.3) (0.7)Result in joint ventures 0.0 0.0Finance net (5.8) (6.4)Result before tax (7.1) (7.2)JL's share of the result (7.4) (7.2)

Invested capital (average) 315.0 145.1Return on invested capital (0.4)% (0.5)%Average no. of employees 60 19


26

During its first year as an independent business unit, Lauritzen Offshore Servic-es focused on implementing its strategy in the dynamically positioned shuttle tanker and accommodation markets.

The first year of operation gave a net re-sult of USD (7.4)m. This was lower than expected due to later than expected con-tractual employment for the first shuttle tanker, Dan Eagle, and delayed finalisa-tion and delivery of the Accommodation and Support Vessel, Dan Swift.

Main eventsA dedicated offshore services organiza-tion was established during the year with the aim of optimizing compliance with in-creasing customer requirements and business development.

In November, Lauritzen Offshore Services in Singapore took delivery of Dan Swift, an advanced Accommodation & Support Vessel (ASV), after extensive reconstruc-tion at Blohm & Voss Shipyard, Germany.

The Dan Swift is a mono-hull vessel differ-ing from traditional semi-submersible and platform accommodation units due in par-ticular to its propulsion system, which en-ables independent navigation without the support of anchor handling and support vessels. Key design features comprise two gangways ensuring redundancy and operational flexibility, while the vessel’s DP2 system ensures superior station-keeping ability. The vessel also provides modern, high standard accommodation

and recreational facilities for approximate-ly 250 passengers.

In June 2009, the Dan Swift secured a contract from the Norwegian oil and gas company, Statoil, for employment in Bra-zil. The contract commenced at the end of December 2009 and is expected to em-ploy the vessel for most of 2010.

Shuttle tanker Dan Eagle entered into long-term employment with the Brazilian energy major Petrobras starting in August 2009. The Dan Eagle will be followed by the Dan Sabiá and Dan Cisne, two shuttle tanker newbuildings under construction in China that are contracted to Transpetro, a subsidiary of Petrobras, with delivery dur-ing 2011.

A Brazilian office in Rio de Janeiro was established during the fourth quarter to provide shore-based support for the Dan Swift contract and as a platform for fur-ther Brazilian market involvement.

Global market developmentsOil prices have lingered at the USD 70+ level since summer 2009 and while deep-water drilling activity has not been se-riously impacted by the adverse world economic conditions during 2009, new startups for floating production projects remained slow. However, the market for specialized, deepwater offshore vessels remained firm, and thus both Dan Swift and Dan Eagle were committed on attrac-tive contracts.


27

Shuttle tankersThe global shuttle tanker fleet currently comprises 56 vessels and ten newbuild-ings on order, cf. Figure 12, with delivery of three units in 2010 and seven in 2011, two of which are dedicated Jones Act shuttle tankers for operation in US waters. It is not likely that additional newbuildings will be-come available within this timescale.

As all existing shuttle tankers are tied up on contracts and conventional tankers cannot be used as substitutes without conversion, additional tonnage require-ment generated by new field develop-ments will necessitate investments in new vessels. As production levels fall in the North Sea, some existing shuttle tankers may become available for redeployment, but these will be few and they will not be sufficient to satisfy future demand.

Accommodation unitsThe current high-end accommodation fleet consists of 21 semi-submersibles in addition to Dan Swift. Further, four semi-submersibles are on order with possible delivery during 2010 of which two are cur-rently considered uncertain. While sev-eral mono-hull new-build and conver-sion projects were planned, only a limited number still exists. One high-end unit will probably be delivered in 2011, while an-other two remain uncertain but may pos-sibly be delivered in 2011 or later. It is not considered possible for additional high-end ASVs to enter the fleet in the short to medium term.

Lauritzen Offshore Services’ fleetIn its first year of operation, Lauritzen Off-shore Services’ total number of ship days only reached 390 (59 days in 2008). At year-end 2009, the operation included Dan Swift and Dan Eagle.

Fleet managementLauritzen Offshore Services performs in-house ship management functions for the offshore units.

Being a pioneer in the development of a new accommodation vessel concept de-mands close attention to quality manage-ment, which is a strong driver for retaining technical management and competen-cies. This applies to project development where accrued knowhow gives a signifi-cant competitive edge but also in day-to-day operations and maintenance where increasing experience leads to a better balance between cost control and qual-ity assurance.

Health, Safety and EnvironmentLauritzen Offshore Services has obviously implemented high Health, Safety and En-vironment (HSE) standards as required by the offshore oil & gas industry. Our HSE philosophy is based on a ZERO mindset in which we commit ourselves to the active prevention of all incidents and accidents. HSE is always at the forefront of our ap-proach and forms an integral part of our operations.


28

6 / 284 / 9

3 / 22

- / 6

7 / 12

7 / 24

11 / 152 / 2

- / 23 / 7

Projects in bidding & final design stage / Projects in planning or study stage

FIG 13: OFFSHORE PROJECTS POTENTIALLY REQUIRING FLOATING PRODUCTIONS SYSTEMS


29


30

Outlook for 2010Even though the global energy markets have been affected by the global econom-ic downturn, a rebound in oil demand is increasingly likely during 2010. With con-ventional oil reserves ashore and in shal-low waters growing increasingly sparse, deepwater exploration is expected to continue to grow, so the market for off-shore services is expected to remain firm in 2010.

With demand picking up on the back of global economic recovery, Lauritzen Off-shore Services is pursuing addition-al new business opportunities in the off-shore services markets. Towards the end of 2009, new orders for floating produc-tion systems were reported for the first time since mid-2008. This will generate demand for shuttle tankers and accom-modation vessels in the near to medium term.

It is estimated that a total of 170 offshore projects potentially requiring a floating pro-duction system are in the planning cycle. Such projects are expected to also require accommodation services in the construc-tion and installation phase (and eventual-ly also repair & maintenance), while shut-tle tanker services will be required when oil production starts from the field. Brazil is the most active region for these future projects with a total of 34 projects poten-tially requiring installation of floating pro-duction systems, cf. Figure 13.

Operations will benefit from high contract coverage and thus results in 2010 are ex-pected to be considerably better than in 2009.


31

Lauritzen Tankers2009 was a difficult year with net results of USD (79.7)m being significantly adversely impacted by provisions and write-downs amounting to a total of USD (71.6)m. Re-sults were lower than expected and very unsatisfactory.

EBITDA in 2009 was USD (9.8)m down from USD 18.9m in 2008. The decline was due to the deteriorating product tank-er market in early 2009 that evolved into a virtual market collapse, which also af-fected operations in joint ventures with a result of USD (4.5)m, down USD (4.5)m on 2008.

Part of the business was generated in a joint venture in which Lauritzen Tank-ers has a controlling interest. The minor-ity shareholders’ share of profits was USD 5.0m compared to USD 5.3m in 2008.

Results were heavily affected by the poor trading conditions and the weak market outlook. Adjusted for one-offs (provisions and write-downs and gains on asset dis-posals), results amounted to USD (8.1)m in 2009 compared to a similarly adjusted figure of USD 3.1m in 2008. Both years were based on operating an average of about 11 vessels.

Main eventsOne major focus in 2009 was to realign the order programme and in agreement with the builders, the delivery plan for sev-en MR product tanker newbuildings with scheduled delivery in 2009-11 was de-ferred into 2013, cf. p. 12.

A 40,000 dwt newbuilding scheduled for delivery in early 2009 was cancelled as the shipyard was unable to meet the con-tractual delivery date.

The sale of a 50,500 dwt product tank-er newbuilding for delivery 2009 could not be completed since the buyer was unable to take delivery. Agreement on compen-sation has subsequently been reached.

Global market developmentsWith the start of the increasingly difficult trading conditions following the financial crisis late 2008, earnings for MR product tankers started a decline that did not stop until early in the fourth quarter of 2009. The problems were primarily in the Pacif-ic Basin with new product tankers enter-ing service increasingly facing problems in finding employment. By early March 2009, the Atlantic Basin had been hit practical-ly as hard and spot market earnings fell below operating costs with second-hand prices following suit. Average spot rates were down by 55% in 2009 compared with 2008, cf. Figure 14.

Demand for product tankersCrude oil prices dropped from almost USD 150 per barrel in the second quarter 2008 to around USD 35 per barrel in late 2008 and early 2009. Production cuts by OPEC led oil prices recovering to USD 80 per barrel at year-end 2009. Despite lower prices, declining global economic activity in early 2009 led to a fall in the annualised consumption of oil products of 3.4% and 2.6% respectively in the first two quar-


32

FIG 14: MONTHLY SPOT MARKET FREIGHT RATES USD ‘000/DAY


0

10

20

30

40


MR earnings (average of selected routes)

KEY FIGURES USDm

2009 2008

Revenue 62.8 85.6EBITDA (9.8) 18.9Depreciation and write-downs (58.8) (20.0)Profit on sale of vessels 0.0 10.7Operating income (68.5) 9.6Result in joint ventures (4.5) 0.0Finance net (1.2) (7.2)Result before tax (74.2) 2.4JL's share of the result (79.7) (2.2)

Invested capital (average) 154.5 218.1Return on invested capital (47.3)% 4.4%Average no. of employees 75 87


33

FIG 15: IMPORT OF REFINED OIL PRODUCTS INTO OECD 2008 & 2009

16%

20%

7%

15%

12%

30%

Naptha Gasoline Jet & Kerosene

Gasoil/Diesel Heavy Fuel Oil Other Products

15%

18%

8%

17%

14%

28%

Naphtha Gasoline Jet & Kerosene


15%

18%

8%

17%

14%

28%

Naphtha Gasoline Jet & Kerosene


Source: IEA


34

ters of the year according to the IEA. Re-fineries cut back on utilization in order to restrain inventory growth and defend al-ready strongly declining margins.

As a result, world seaborne trade in oil products fell by 3% in 2009 compared with 2008 according to Maritime Strate-gies International.

Imports into North America declined es-pecially whereas imports into OECD Eu-rope and OECD Pacific were slightly up on 2008 levels, according to IEA. Gasoline particularly but also other products saw a decline in transported volumes where-as strong increases were noted for move-ments of jet fuel/kerosene, gasoil/diesel and heavy fuel.

The composition of products transport-ed into the OECD area 2009 was skewed towards heavier products compared to 2008, cf. figures 15.

Demand for product tankers was also af-fected by the build-up of floating storage of middle distillates, with LR2 and LR1 prod-uct tankers being mostly used for this.

Supply of product tankersFor the second consecutive year, the glo-bal MR product tanker fleet of between 25,000 and 60,000 dwt is estimated to have increased by about 8% after deliv-eries of about 8m dwt and scrapping of 2m dwt. The precise figures are uncertain as many owners were working with yards to alter delivery schedules, which could

stretch the order book over a longer peri-od than previously projected. At year-end 2009, the world MR product tanker fleet was estimated to amount to approximate-ly 72m dwt.

In 2009, new orders almost ceased and at year-end 2009, the order book stood at 20m dwt or some 30% of the existing fleet. Based on the current delivery sched-ule, more than half the order book will be delivered in 2010, cf. Figure 16.

Demolition of single hull tankers in the 25-60,000 dwt segment only had a lim-ited impact on scrapping in 2009, but due to the depressed freight markets, a huge proportion of the app 10m dwt single hull tankers is likely to be phased out within the next few years.

Lauritzen Tankers’ fleetLauritzen Tankers operates with a high proportion of coverage for the fleet with time-charters to first class charterers.

In 2009, total ship days reached 3,824 with 10.5 vessels on average compared to the 4,229 days with 11.6 vessels on av-erage reported in 2008, cf. Figure 17.

At the end of 2009, Lauritzen Tankers con-trolled a fleet of 10 MR product tankers.

Fleet managementAt January 1st 2009 technical fleet man-agement, previously undertaken by Lau-ritzen Fleet Management, was transferred to the individual business units and today


35

fleet management is an integrated part of Lauritzen Tankers’ operations.

Lauritzen Tankers focuses constantly on the efficiency of technical management in order to meet increasing customer re-quirements.

The figure for own fleet off-hire, including scheduled dry docking, was 3%

Prospects for 2010Demand growth for product tankers is es-timated at about 4% in 2010 by for exam-ple Maritime Strategies International on the basis of oil consumption picking up on the back of the forecast recovery of the world economy. Due to the large invento-ries on and offshore, the product tanker market will need additional time to recov-er from the slightly improved conditions in late 2009 and early 2010. Another factor hampering a sizeable rise in demand is the increased use of ethanol which substi-tutes part of the increase in North Ameri-can gasoline demand.

The potential impact of the upcoming final date of the phase-out scheme for single hull tankers has gathered steam in recent months with a number of countries hav-ing decided to ban such tankers from their waters and ports. This implies that fleet growth might be reduced to the same or-der of magnitude as demand growth. This might pave the way for a recovery in earn-ings in the product tanker market in the latter part of 2010 or early 2011.

In 2010, Lauritzen Tankers will take deliv-ery of one 50,500 dwt newbuilding from China and two 53,000 dwt MR3 new-buildings from Japan.

At year-end 2009, contract coverage for the product tanker fleet amounts to about 62% for 2010.

Lauritzen Tankers’ results are expected to be considerably better in 2010 than 2009. However, excluding one-offs (e.g. provi-sions, reversals and write-downs), results in 2010 are expected to be in line with the similarly adjusted figure for 2009.


36

FIG 16: MR PRODUCT TANKER ORDER BOOK DWTm 2005-09(2008-09 by scheduled delivery year and estimated deliveries)

Source: Clarkson Research Services, Oil Trade & Tanker Outlook


0

5

10

15

2008 2009

Other Shared charter Chartered Part owned Own

913

8

6,3

0

5

10

15

20

25

30

35

2005 2006 2007 2008 Estimated deliveries in

2009

Order book year-end

2009

Expected deliveries in

2010

2009 2010 2011 2012 2013 Total order book


37

Corporate Governance

CORPORATE STRUCTURE

J. Lauritzen A/S100%

LF Investment Aps(former Vesterhavet A/S)

100 %

Lauritzen Fonden

Lauritzen Bulkers

Lauritzen Kosan

Lauritzen Tankers

Lauritzen Offshore Services

DFDS A/S 56% *

Lauritzen Fonden through LF Investment ApS has holdings in the oil analysis, meas-uring equipment, software, biotechnology and real estate sectorsDFDS is a leading sea transport network integrating freight and passenger services, headquartered in Copenhagen and quoted on NASDAQ OMX, the Nordic Exchange Copenhagen. * In December 2009, DFDS A/S acquired Norfolk Line from A. P. Moller Maersk, cre-ating Northern Europe’s leading sea-based transport network. This made the latter a major shareholder in DFDS A/S, although Lauritzen Fonden via Vesterhavet Hold-ing A/S remains the majority shareholder. The transaction is subject to customary conditions. .


38

The basis for JL’s corporate governance includes the Danish Companies Act, the fundamental principles and recommenda-tions from the Danish Committee on Cor-porate Governance considered relevant for a non stock-listed company, the com-pany’s Articles of Association, the Board of Directors’ Rules of Procedure, and its directions to the Executive Management.

Good corporate governance is the key to building and maintaining candid relation-ships with our owners, employees, cus-tomers, partners, and suppliers. JL is de-termined to ensure that the company’s management structure and control sys-tems are appropriate and work satisfacto-rily in order to make certain that JL’s busi-ness operations are being reliably and profitably conducted.

OwnershipJL’s history goes back to 1884. Owner-ship of the company was anchored in the Lauritzen family until 1945 when the grad-ual process of transferring ownership to JL-Fondet (JL Foundation) was started.

December 2009 saw the completion of the Lauritzen Group’s corporate restruc-turing with JL-Fondet being renamed Lau-ritzen Fonden (Lauritzen Foundation). At the same time, Vesterhavet A/S was trans-formed from a public limited company to a private limited company and renamed LF Investment ApS. Accordingly, Vester-havet’s previous holdings in J. Lauritzen A/S were allotted to Lauritzen Fonden.

Lauritzen Fonden is a commercial foun-dation and as such is a self-governing in-stitution in Danish law. It is governed by the Danish Foundation Act and the Danish Ministry of Justice as well as the Danish Ministry of Economic and Business Affairs oversee the Foundation.

According to the Foundation’s charter, one major aim of Lauritzen Fonden is to improve Denmark’s reputation by promot-ing and developing the Danish Shipping industry.

Lauritzen Fonden’s charter also lays down how it should exercise its role as owner of its affiliated companies and its core poli-cies are to:

• Operate a prudent dividend policy, tak-ing account of the continued existence and development of the affiliated enter-prises.

• Pay special attention to its shipping business.

• Ensure the independence of affiliated enterprises from the Foundation.

• Take an open-minded approach to-wards capital increases in affiliated en-terprises.

General meetingThe general meeting is JL’s supreme gov-erning body and the annual general meet-ing is required to be held before the end of May.


39

Board of DirectorsThe Board of Directors consists of at least four and no more than seven members elected by the general meeting. Members of the Board of Directors serve for one year and may stand for re-election. Board members cannot be re-elected after their 70th birthday.

Additional members of the Board of Di-rectors are required to be elected by the employees of the company and its sub-sidiaries in Denmark, pursuant to the Dan-ish Companies Act and associated rules. Board members elected by the employ-ees have four-year tenure and may also stand for re-election.

JL’s Board of Directors has eight mem-bers, five of whom are elected at the gen-eral meeting and three elected by the em-ployees. At year-end 2009, the average length of service of the Board of Directors was six years.

The board is broadly composed of mem-bers with diverse and extensive experi-ence. At year-end 2009, the average age of the members of the Board of Directors was 55.

The board ensures that an annual strate-gic plan and an annual budget are drawn up and approved and that monthly and quarterly reports are submitted.

The board met seven times in 2009, in-cluding a mid-year strategy review meet-ing. Otherwise, the board convenes when

deemed necessary. Between meetings, recommendations are submitted to the board for written resolution.

No board committees have been estab-lished.

Management structureJL has a two-tier management structure consisting of a Board of Directors and Executive Management. Day-to-day man-agement is conducted by the Executive Management in line with rules and pro-cedures laid down by the Board of Direc-tors.

Activities relating to day-to-day business are delegated insofar as possible to the individual business units, subject to well-defined financial and risk limits. Opera-tional efficiency is supported by central-ised shared corporate services such as business control, human resources, IT, legal and insurance, procurement, and treasury.

Further, Group standards apply to finan-cial management, investment considera-tions, risk management etc.

Executive ManagementThe Executive Management is appointed by the Board of Directors and consists of President & CEO Torben Janholt, Execu-tive Vice President & CFO Birgit Aagaard-Svendsen, and Executive Vice President Jan Kastrup-Nielsen (President, Lauritzen Kosan and Lauritzen Tankers). Extraor-dinary or major dispositions may only be


40


41


42

implemented by the Executive Manage-ment on the basis of specific authorization granted by the board.

An executive committee functions as the coordinating forum for the day-to-day management of the JL Group and con-sists of the Executive Management to-gether with Ejner Bonderup (President, Lauritzen Bulkers) and Anders Mortensen (President, Lauritzen Offshore Services).

Financial management and reportingJL’s financial management comprises long-term financial projections and an-nual budgets followed up by quarterly and monthly reporting. Internal quarter-ly reports include profit forecasts for the full year. Annual profit forecasts are also drawn up twice a year for following years.

Effective, credible reporting requires well-defined levels of authorisation, segrega-

tion of duties and transparent reporting structures. The Group’s IT systems pro-mote the requisite knowledge-sharing and transparency.

Statutory reporting and internal manage-ment reporting are based on common policies, common databases and a com-mon reporting system. These reporting policies apply to the entire Group, its busi-ness units, JL as parent company as well as subsidiaries.

The Executive Management defines and controls policies and procedures to sup-port our business, risk management, re-porting and benchmark these against generally accepted international practice.

An anti-fraud policy has been enforced since 2006 and was updated in late 2009 to include guidelines on whistleblower re-porting and related employee protection.


43

Corporate Social ResponsibilityJL recognises its responsibilities to so-ciety. With growing business activities in coming years, JL is dedicated to ensur-ing that expansion is achieved in a socially and environmentally responsible way. Part of our heritage is to practise respon-sibility for our employees and society as well as support for humanitarian causes and involvement in philanthropic activi-ties.

Lauritzen Fonden (Lauritzen Foundation) is the sole owner of JL. In addition to its commercial activities, it has an explicit charitable aim and is engaged in a broad range of social, cultural, humanitarian, educational and research related activities in Denmark and internationally.

SustainabilityJL’s mission is to create added value for customers, partners and owners and this can best be achieved by managing oper-ations and the use of resources with re-spect and accountability.

Human and employee rightsJL supports and respects the protection of human and employee rights and re-frains from any actions that may directly or indirectly encourage or contribute to in-fringement of these rights. In compliance with our core value of respect, we regard diversity as an important element in build-ing a global business.

JL employees are the company’s most im-portant assets. The key to success is our

commitment to attracting, training, devel-oping and retaining capable and commit-ted employees, whose professionalism and personal qualifications and compe-tencies can continue the drive towards our world-class vision, by living and lead-ing our core values, at sea and ashore.

JL respects and treats employees equally and fairly and does not accept any form of harassment or discrimination. We seek to protect our employees from acts of abuse or threats in the workplace, whether com-mitted by managers or fellow employees, and also when determining and imple-menting disciplinary measures.

JL will not knowingly participate in or ben-efit from any forms of forced labour or child labour, nor will we interfere with our employees’ rights to form and join unions and to bargain collectively.

Security JL recognizes the importance of interna-tional requirements for maintaining high security standards at sea and ashore in order to prevent acts of terrorism, pi-racy, armed robbery and other criminal acts which could threaten the security of crews, personnel, assets, the public and the environment.

Health, safety and environmental responsibilityJL aims to actively promote a culture of safety and environmental excellence at all levels of the organisation. JL seeks to pro-vide a safe, healthy work environment for


44


45

FIG 20: SOx AND NOx EMISSIONS 2005-09

FIG 19: CO2 ENERGY EMISSIONS G/TONKILOMETER 2005-09

0.00

0.20

0.40

0.60

2006 2007 2008 2009

SO2 g/tonkilometer NOx g/tonkilometer

0.00

5.00

10.00

15.00

20.00

2006 2007 2008 2009

FIG 18: ENERGY CONSUMPTION KWh/TONKILOMETER 2005-09

0.000

0.020

0.040

0.060

2006 2007 2008 2009


46

all employees and to promote a no-blame culture in order to ensure open and time-ly communication throughout the organi-zation.

JL’s policy is for all employees, whatever their capacity, to be able to perform their duties properly in healthy, safe conditions. JL aims to identify risks and eliminate pos-sible hazards which could result in per-sonal injury, illness or accidents caused by substandard conditions or acts.

JL gives priority to health and safety and environmental management and we em-phasise that our standards can only be met with the total commitment of every individual in the organisation. Throughout the organisation, at sea and ashore, man-agement must lead by example.

Health and safety and environmental ef-forts must be aimed at preventing haz-ardous situations, accidents and envi-ronmental damage. Should these occur, every employee is required to participate in determining and eliminating possible causes in order to prevent repetition.

Lost Time Injury Frequency (LTIF) statis-tics developed unsatisfactorily from 1.13 in 2008 to 2.64 in 2009. The injuries, of-ten involving third party contractors, have been analysed and the lessons learnt are being incorporated into our HSE proce-dures.

In our continuous efforts to manage our working and operational environment we are aware that uncontrolled deviations from our business processes remain the

real target and challenge for continuous improvement.

JL’s performance trends for observations during port state controls, vetting inspec-tions, etc., were again satisfactory.

With respect to safeguarding the environ-ment, we manage our activities in com-pliance with all applicable national and international laws and regulations. Exec-utive management and the management of each business division and segment aim to ensure that all individual employ-ees work to:

• Endeavour to prevent pollution through operational procedures and to ensure compliance by means of audits and in-spections, and by providing the means for their review and revision.

• Endeavour to use environmentally re-sponsible practices in our activities, to set targets and monitor improvements.

• Endeavour to reduce the environmen-tal impact of our activities by efficient use of resources employing responsible disposal practices.

• Demonstrate accountability by disclos-ing our environmental performance fig-ures.

• Follow technological developments for environmental improvements that are relevant to the business.

• Support and participate in R&D initia-tives.

• Ensure that awareness, enthusiasm and respect for the environment is an inte-gral part of the company’s daily routines through education/training and contin-uous improvement of the competencies of employees, both at sea and ashore.

FIG 19: CO2 ENERGY EMISSIONS G/TONKILOMETER 2005-09


47

Energy consumption and emissionsIn 2009, vessels technically managed by JL and JL’s external ship managers con-sumed a total of 218,406 tonnes of fuel oil to produce 2.5m MWh of energy.

Average energy efficiency was 0.048 KWh/tonkilometer compared to 0.045 in 2008, cf. Figure 18. The decrease in effi-ciency was due to an increased number of waiting days and ballast miles due to the constrained trading conditions.

Total CO2 emissions declined by 4.5% from 720,608 tonnes in 2008 to 688,471 tonnes in 2009. However, CO2 emissions per tonkilometer saw a slight increase from 12.73 in 2008 to 13.40 in 2009, cf. Figure 19, attributable to the reduction of tonkil-ometers caused by the increased number of waiting days and ballast miles.

NOx emissions were slightly up on 2008 due to the reduction in tonkilometres, whereas emissions of SOx per tonkilo-metres slightly decreased in 2009 due to greater use of low sulphur oil, cf. Figure 20.

Emissions figures are based on actual consumption, oil quality and engine emis-sion factors and are calculated in accord-ance with IMO MEPC.1/Circ.684.

Copenhagen climate summitIt is imperative that legally binding global rules should apply to CO2 reductions for the carriage of world trade, 90% of which is carried by ships, the form of commer-cial transport that is acknowledged as the most carbon efficient.

The UN Climate Change Conference (UN-FCC) in Copenhagen in December 2009 did not give a clear mandate for the IMO to build on the combination of technical, operational and economical measures developed by IMO for reducing shipping’s global CO2 emissions. JL will use its mem-bership of the Danish Shipowners’ Asso-ciation to continuously support the work of the IMO and other international bodies in this respect.

Anti-corruption In compliance with our core value of ac-countability, JL firmly distances itself from any actions that unjustly or unlawfully in-fluence officials and/or the judiciary.

Innovation JL encourages entrepreneurship, crea-tivity and innovation as illustrated by the development and the construction of the series of ten identical gas carriers com-pleted in 2009. The vessels’ environ-mental credentials were built to Bureau Veritas’ Clean Ship notation and to the requirements of IMO Green Passport. In 2008, Lauritzen Kosan received the “Ship of the Year” award at the Lloyd’s List Lon-don Awards for Isabella Kosan, the first vessel of this series.

Creativity and technological innovation are also a driving force behind the devel-opment of JL’s new business activities in dynamically positioned support vessels for the offshore industry. The recent deliv-ery of Dan Swift is an example of a unique, technologically advanced accommoda-tion vessel specifically designed for serv-icing the demanding offshore market.


48

In 2009, Lauritzen Kosan became ISO14001 certified as part of the continuous commitment to optimize en-vironmental performance. During 2009 Lauritzen Ko-san worked on various environmental programs aimed at reducing its environmental impact that will continue into 2010 together with additional programs that are under development.One of the programs has involved the development of a benchmarking tool for vessel performance and environmental data allowing Lauritzen Kosan to de-velop vessel specific environmental targets based on KPI’s as well as providing important performance data which enable early intervention in case of perform-ance deterioration resulting in increased fuel usage.Another program initiated in 2009 is the development of a catalogue of Ship Energy Efficiency Improvement Areas. This catalogue will form base for further specif-ic projects and ideas aimed at reducing our environ-mental impacts

Lauritzen Bulkers has initiated a number of projects aiming at minimizing the environmental impact of its fleet of owned vessels and at increasing their fuel ef-ficiency.Lauritzen Bulkers is working with NanoNord A/S and Lloyd’s Register to test the Lab-On-A-Ship (LOAS) system which aims to reduce emissions through en-hanced control of engine combustion, lubrication and exhaust gases.In applying modern technology and improved meth-ods on its newbuildings, Lauritzen Bulkers is seeking to achieve a rise in fuel efficiency via propeller design and main engine cylinder lube oil control mechanisms, and has also undertaken a project involving biodegrad-able cleaning products for hold washing.

ENVIRONMENTAL INITIATIVES


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50

In addition to development and innova-tion conducted by JL, Lauritzen Fonden (Lauritzen Foundation) supports initiatives and contributes to identifying new techni-cal solutions that could benefit the entire shipping industry.

Through its majority holding in NanoNord A/S, Lauritzen Fonden is working together with Lloyd’s Register and Lauritzen Bulk-ers to support development of the Lab-On-A-Ship (LOAS) system with the aim of enhancing combustion and fuel efficiency. The collaboration is part of the trans-in-dustry Danish “Green Ship of the Future” project.

The recent development of complex soft-ware aiming at reducing emissions has been supported at the Danish Technical University (DTU). This software is also able to determine impact on the so-called En-ergy Efficiency Design Index (EEDI) which the IMO – with strong Danish input head-ed up by the Danish Maritime Authority – is working to implement as a requirement aimed at making new vessels more ener-gy efficient.

Community The Lauritzen Fonden supports and spon-sors a broad range of community initia-tives directly or through collaboration with NGOs.

During 2009, the Foundation intensified its assistance to disaster centres. Typhoon victims in the Philippines were among those who received support.

For several years, including 2009, the Foundation has been contributing to the Danish charity “Danmarks Indsamling” which raises funds to support 12 of Den-mark’s largest humanitarian organisa-tions.

In early 2010, the Foundation also contrib-uted to fund-raising to support women in Africa and the victims of the devastating earthquake in Haiti.

Outlook JL strives to enhance its CSR goals and to establish a CSR governance structure to ensure guidance from the Executive Management as well as decentralised in-volvement and responsibility and our aim is sign up to the United Nations Global Compact.


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Organisation and peopleJL’s vision and values aim to deliver sus-tained world-class maritime services and require an efficient organisation and highly skilled, competent employees.

In 2009, the turbulent global business en-vironment affected the organisation in the way that JL cut back on new recruitment. JL’s LEAN activities under “Project World-Class”, which increase efficiency across the organization, further reduced the need for additional staff.

JL’s growth strategy and the delivery of new tonnage, however, did mean addition-al competent employees were required. Vacancies were filled and staff were re-cruited for new positions in all business units, for overseas offices and for new-building site teams in the Far East.

Even so, total recruitments amounted to just a third of the figure for 2008 when JL took on the largest number of new staff during the past ten years.

Competency development ashoreJL’s competency programme, known as the JL Academy, continued in 2009 as did JL’s management and leadership pro-gramme with lecturers from internation-al business schools. In 2009, employees also attended open programmes at inter-national business schools or courses of-fered by national academies. A number of employees were enrolled in degree and EMBA programmes.

Internal courses on various themes and classes in English, Spanish, and Chinese were run throughout during the year. JL’s various trainee programmes also contin-ued in 2009 although the intake of new trainees was lower than in 2008.

2010 will see JL Academy being upgrad-ed and a number of new courses will be offered, including a post graduate pro-gramme.

Competency development at seaSkills development courses were also in focus in 2009, particularly in the expand-ing offshore service operations where mandatory courses were conducted due to flag state requirements. We also ran training programmes for HSE (Health, Safety and Environment) to upskill the crews aboard our vessels.

Organisational assessmentAs an integrated part of our world-class vision, JL regularly conducts organisa-tional surveys and survey results are used for the development of educational and training programmes throughout the or-ganisation.

2009 saw the introduction of the Denison Organizational Culture Survey, based on more than 20 years of research on over 1,500 organisations and 50,000 individ-uals, measuring involvement, consisten-cy, adaptability, and mission. The survey again confirmed JL as a high performing company.


52

“Together we CREATE a world-class

shipping company”

Competence

Respect

Entrepreneur-ship

Accountability

Team spirit

Enthusiasm

JL’S VISION AND VALUES


53

0

100

200

300

400

500

600

2007 2008 2009

Seagoing Head office Overseas offices Site teams

0

100

200

300

400

500

600

2007 2008 2009


0

100

200

300

400

500

600

2007 2008 2009


23%

70%

5%

2%


FIG 21: TOTAL WORKFORCE 2007-09 YEAR-END FIG 22: DISTRIBUTION OF WORKFORCE YEAR-END 2009


54

Employment terms and conditionsJL offers competitive remuneration packages including salary and pension schemes and employees also enjoy a broad range of additional welfare bene-fits.

Optimising our business requires the full commitment of all staff and their well-be-ing is vital for the company. Employees are offered regular medical checks, “quit-smoking” and similar programmes. Sports activities and gym memberships are also financially supported.

JL considers that its responsibilities in-clude ensuring that employees have an appropriate work-life balance. Where im-balances have resulted in stress or a stress-related disorder for an employee – whether due to private or work reasons – JL offers support by way of professional counselling as well as reviewing their work situation in general.

Effective introduction schemes are in place to ensure that new employees swift-ly become part of JL and procedures are also in place in case JL has to dismiss an employee, for whatever reason. JL always considers how best the company can as-sist employees in a difficult situation either through outplacement schemes, coun-seling or other initiatives.

Senior employees are often highly knowl-edgeable and experienced, which is of great value for the company. JL’s seniors’ policy provides employees approaching retirement with an alternative to early retire-ment or pension and JL’s seniors’ employ-ment schemes benefit individual employ-ees as well as the company by providing a smooth transition of know-how and expe-rience to younger employees.

Employee developmentAt year-end 2009, JL’s total headcount was 769 compared to 684 in 2008. A to-tal of 182 were working at head office in Copenhagen, 36 in the overseas offices, and 551 at sea. Furthermore 18 worked at newbuilding site teams cf. Figures 21-22.

Staff turnover at head office increased to 12.6% from 8.5% in 2008 and included a number of retirements. Average years of service increased to 9.7 years in 2009 compared to 7.3 years in 2008, and aver-age age also increased from 40.6 years in 2008 to 41.9 years in 2009. The in-crease in age was due to a smaller intake of younger employees compared to the year before.


55

Risk ManagementAs a global industry, shipping is exposed to a large number of risk factors, ranging from macroeconomic fluctuations, to po-litical intervention, legal and regulatory ad-justments and to piracy. All such risk fac-tors have the potential to fundamentally alter the way business is conducted.

JL monitors and manages three main types of risk deemed important to our op-erations: Industry risks, operational risks, and financial risks.

Risk management is an integrated part of JL’s corporate governance. Policies on risk management and risk limitation are approved by the Board of Directors. Fur-ther, the Group and individual business units have procedures in place to ensure consistent day-to-day risk management.

Industry risksIndustry risks relate primarily to market volatility and cyclicality that JL cannot in-fluence or can only do so to a very limited extent. However, such risk factors are as-sessed on a daily basis in reviewing short-term market conditions and opportunities and they form the basis for the medium to long-term strategy of the company.

JL transports bulk commodities, liquefied gasses, crude and refined oil products and there is a close correlation between global economic trends, political interven-tions, the demand for such commodities and the associated requirement for ocean transportation. Similar factors create the business environment for the extraction of

oil and gas which forms the basis for JL’s offshore services. Changes in global de-mand affect revenues, costs, utilization of assets and subsequently asset values.

Shipping, including servicing the offshore industry, is a cyclical industry with short-er or longer market cycles that create freight rate volatilities. JL seeks to manage such risks through a balanced portfolio of owned vessels, time-chartered tonnage and contract coverage supplemented with fuel oil hedging and to some extent Forward Freight Agreements (FFAs).

Business strategies with limits for contract coverage relating to individual vessel seg-ments including FFAs, overall limits for off-balance sheet exposure (chartered ton-nage), and fuel oil hedging are approved by JL’s Board of Directors and reporting on these is an integral part of JL’s report-ing routines.

JL’s exposure to off-balance sheet oper-ations (e.g. time-charter commitments) is limited on the basis of net exposure of each segment of the entire fleet and thus takes due account of contract coverage.

Risks associated with fluctuations in asset values are assessed using models that incorporate forecast economic/physical service lives, shipping cycles and average costs per fleet unit.

Operational risksOperational risks arise from running our business operations.


56

Industry risks

Financial risksOperational risks

The figure illustrates the relationship between overall industry risks and specific

operational and financial risks associated with JL’s business activities.

TYPES OF RISKS


57


58

SafetyCasualties from ship operations can have serious consequences and so merchant shipping is one the most heavily regulated industries in the world and was among the first to adopt widely implemented interna-tional safety standards. Further, the oil majors have implemented additional re-quirements relating to safety, environmen-tal protection, etc.

Any accident could have serious conse-quences for JL’s financial position due to loss of income, repair costs, claims and damages and consequential loss of cus-tomer satisfaction.

JL recognizes the risks and potential haz-ards involved in owning, operating and managing a large, diversified fleet of ships worldwide. These risks include vessel performance in accordance with statutory requirements and additional customer re-quirements for health and safety, security, quality and environmental issues.

One major prerequisite for handling these risks is to ensure that all ships under JL’s control comply with comprehensive inter-nal management systems that are in line with or exceed the requirements of the International Safety Management (ISM) code. Management systems and report-ing practices are regularly revised so as to communicate best practice across the fleet, thus avoiding or minimizing the risk of incidents, accidents and time loss.

Finally, ongoing training of crews is the key to cutting risks relating to ship and cargo handling operations.

Insurance A policy on insurance has been adopted with the aim of reducing the financial risks of any incidents and casualties.

JL’s insurances cover JL’s assets, hired and operated fleet, cargo and non-ma-rine risks. Insurance is taken out with first class international insurance companies. As a general rule insurances are always taken out with a certain financial safety margin to avoid any serious consequential impact of an incident or casualty on JL’s financial status.

Counterparty Managing counterparty risk has become an increasingly important part of the ship-ping industry, particularly in view of the current economic crisis and the substan-tial entry of new players into the market. JL’s policy comprises both suppliers (e.g. critical IT systems) and customers (e.g. charterers).

Important counterparties are monitored and rated and limits to exposure have been established. Very large contracts and very long-term commitments are re-viewed and approved by the Executive Management and in some cases by the Board of Directors. Seeking the highest degree of guarantees from counterparties is part of the policy.

JL is currently reviewing its policies with a view to extending the measures available to minimise counterparty risks.

IT systemsIT is critical for the conduct of our busi-


59

ness. JL’s IT systems are available 24/7 and are accessible worldwide. Systems for “vessels-online” are being implement-ed, adding even further to the demands being made on our systems, platforms and infrastructure.

Redundant systems and duplicate infra-structure are in place. JL frequently tests to see that restoring systems can be done within pre-defined time limits.

The company’s IT security policy defines the overall system, platform and infra-structure requirements and defines the framework for user behaviour and access to systems.

Financial risksFinancial risks relate to capital manage-ment risks (access to funding and liquid-ity) and in general to the financial markets (exchange rates, interest rates, stock mar-ket share prices).

Capital managementThe purpose of capital management is to ensure sufficient capital for the day-to-day operations, investment programs and fi-nancial commitments.

Managing capital requirements is an inte-gral part of JL’s long-term financial plan-ning and is included in our reporting sys-tem.

The general guidelines on capital ap-proved by the Board of Directors include requirements for the level of equity for the Group defined by minimum solvency ratio

(35-40%) figures, predefined minimum li-quidity (USD 50-200m) and the require-ment for external funding to be drawn on or post delivery of vessels.

Being wholly-owned by Lauritzen Fonden, JL pursues a prudent dividend policy that supports JL’s ability to grow its business organically. During periods of tight finan-cial markets, as in 2008-09, dividends are suspended. Otherwise, JL normally pays dividends of up to 25% of JL’s share of profits.

JL is strongly solvent. At year-end 2009, solvency was 52% down from the 59% reported at year-end 2008 due to a sig-nificant increase in the number of owned vessels.

Prior to the financial crisis, JL had adopt-ed a growth strategy for its own fleet and at year-end 2009, the order book amount-ed to approximately USD 1,656m (down from 2,400m at year-end 2008), with 38% being self-funded (32% end of 2008).

The collapse of the financial sector in late 2008 and the subsequent collapse of shipping markets meant that a larger part of the newbuilding program had to be self-financed. Lauritzen Fonden confirmed its long-term commitment by granting JL a subordinated loan of initially USD 100m. By including the subordinated loan as eq-uity share, the solvency ratio at year-end 2009 amounted to 57%.

Capital requirement (equity and financing) are constantly assessed in various scenar-


60


61


62

ios and sensitivity analyses. Even though JL had expected significant reductions in rates compared to 2007 and 2008, the strength and the speed of the collapse of the shipping markets had not been in-cluded in our scenarios. In the light of the events following the collapse of the finan-cial and the shipping markets, JL’s gen-eral capital guidelines and transparent fi-nancial management and reporting have demonstrated their prudence in helping JL maintain and increase the funding re-quired for newbuilding program.

At year-end 2009, the financing for JL’s in-vestment program with deliveries stretch-ing far into 2011 was confirmed. The aver-age tenor of current commitments is 6.2

years. For further details on drawn com-mitments please refer to Note 21 of the fi-nancial statements.

Other financial risksThe overall policies and objectives for fi-nancial market risks, e.g. foreign exchange risks and interest rate risks, are defined by JL’s Board of Directors.

Financial risk management only applies to underlying financial risks and hedging contracts are made to reduce these risks. Risks primarily relate to non-USD curren-cies, net interest rate and credit risks and access to the financial markets. Please refer to Note 22 of the financial statements for further detail.


63

Financial reviewJL’s net result in 2009 was USD 74.6m (USD 149.5m in 2008), which included USD 17.1m profits from the sale of vessels and other fixed assets (USD 153.8m in 2008) as well as provisions, write downs and reversals of these which affected EBITDA, operating income and net results in joint ventures.

Adjusted for these one-off items (provi-sions, write downs, reversals, and profits from the sale of assets), net results were USD (6.3)m, down from USD 204.4m in 2008. The decline mainly related to the top line effects of the collapsing shipping markets.

Revenues totalled USD 482.9m com-pared to USD 665.8m in 2008. The de-cline was due to the downturn in the ship-ping markets that particularly affected JL’s dry bulk and product tanker activities. The decrease was partly off-set by increasing revenues from the expanding fleet of eth-ylene gas carriers and offshore units and net gains on Forward Freight Agreements (FFAs) compared to net losses in 2008.

Hire of chartered vessels amounted to USD 170.2m, down from USD 322.2m in 2008. In 2008, chartered vessels hire in-cluded USD 86.0m provisions for onerous time-charters for dry bulk activities, which were all used or reversed in 2009. How-ever, due to the depressed product tank-er market, provisions of USD 9.3m have been included in 2009 to accommodate onerous time-charters for Lauritzen Tank-ers.

Operating costs for owned and bareboat chartered vessels totalled USD 54.7m, slightly down from 2008 due to cost sav-ings on an increasing fleet of owned ves-sels.

Other operating costs including bunkers, port expenditures and other voyage-re-lated costs amounted to USD 55.3m, up from USD 46.5m in 2008 primarily due to changes in trading patterns. Office and fleet staffing costs and oth-er sales and administrative costs totalled USD 88.2m, down from USD 99.5m in 2008 due to cost savings and the appre-ciation of USD against DKK and EUR.

EBITDA amounted to USD 134.9m, down from USD 158.9m in 2008. The decrease mainly related to Lauritzen Tankers and Lauritzen Kosan.

The sale of six bulk carriers and other as-sets generated gains of USD 17.1m. For comparison, 2008 saw the disposal of three bulk carriers, three gas carriers, two product tankers and other assets, gener-ating net gains of USD 153.8m.

Depreciation and write-downs totalled USD 76.4m, down from USD 142.6m in 2008 due to the reversal of write-downs on bulk carriers, partly off-set by addi-tional write-downs on product tankers in 2009, and by increased depreciation on the expanding fleet of owned vessels. Net results in joint ventures totalled USD 17.0m, down from USD 27.3m in 2008 due to decreasing profits from part-owned bulk carriers and write-downs on part-owned product tankers.

Net financial income totalled USD (16.5)m, up from USD (38.1)m in 2008 prima-rily due to foreign exchange rate gains and gains on securities partly off-set by increasing interest charges relating to fi-nancing fleet expansion.


64


65


66

Result before tax was USD 76.0m, down from USD 159.3m in 2008. Income tax amounted to USD 3.6m compared to USD (4.6)m in 2008. The change in income tax was mainly related to tax adjustments in previous years.

The result of USD 79.6m for 2009, down from USD 154.7m in 2008, was better than expected and is regarded as accept-able considering the global financial crisis and the world economic recession. Balance sheetAt year-end 2009, total assets amounted to USD 2,188.4m up by USD 420.7m from USD 1,767.7m in 2008 due to substantial investments in vessels.

The total book value of vessels amount-ed to USD 1,037.7m, up USD 465.3m on 2008, whereas brokers’ vessel valuations of the fleet totalled USD 1,034.0m. The value in use of the vessels, taking contract coverage into account, was significantly higher than broker valuations.

Vessels under construction amounted to USD 444.9m (20% of total assets), down USD 213.7m from USD 658.5m in 2008 (37% of total assets) following the delivery of vessels in 2009.

Investments in joint ventures increased to USD 121.3m, up from USD 118.3m in 2008. Broker valuations of vessels owned by partnerships totalled USD 559.3m compared to their book value of USD 718.8m, whereas the value in use of the vessels exceeded the book value.

Other non-current receivables amounted to a total of USD 16.0m down from USD

27.0m in 2008. Current receivables, in-cluding fair value adjustments on FFAs and other derivate financial instruments amounted to USD 123.8m compared to USD 148.0m in 2008.

Total shareholders’ equity was up USD 82.8m at USD 1,130.5m, giving a return on JL’s share of equity of 6.9% compared to 14.7% in 2008.

At year-end 2009, total liabilities amount-ed to USD 1,057.9m, up USD 338.0m on 2008. Total interest bearing debt in-creased to USD 936.4m from USD 405.5m in 2008. Other current payables including fair value adjustments on FFAs and other derivate financial instruments amounted to USD 72.8m (2008: USD 184.9m).

Cash flow statementCash and cash equivalents amounted to USD 172.1m compared to USD 144.4m at year-end 2008.

Cash flow from operations totalled USD (24.1)m, down from USD 299.9m in 2008 reflecting the difficult trading conditions for bulk carriers and product tankers. In 2009 cash flows from investment activi-ties amounted to USD (455.0)m, up from USD (237.3)m in 2008 due to investments in vessels and less proceeds from the sale of vessels.

Cash flows from financing activities (net proceeds from loans) amounted to USD 507.9m compared to USD 290.5m in 2008. The increase was mainly due to at-delivery financing of vessels delivered in 2009 and also a subordinated loan from Lauritzen Fonden via LF Investment ApS, cf. p. 60.


67

Statements and notes J. Lauritzen A/S


68

Income Statement

Group Parent companyNote USD '000 2009 2008 2009 2008

Income3, 4 Revenue 482,891 665,764 - -

Other operating income 20,363 19,432 12,728 11,232 503,255 685,196 12,728 11,232

Hire of chartered vessels (170,208) (322,234) - - Operating costs of vessels (54,682) (58,114) - -

4 Other operating costs (55,264) (46,496) - - 5 Staff costs, office and fleet (67,985) (76,379) (15,375) (20,092) 6 Other sales and administrative costs (20,197) (23,078) (7,968) (12,776)

(368,337) (526,301) (23,344) (32,868)

Result before depreciation (EBITDA) 134,918 158,895 (10,616) (21,636)

Profit and loss on sale of vessels 16,670 146,489 - - Profit and loss on sale of other assets 397 7,325 - -

7 Depreciations and write-downs (76,428) (142,563) (8) (8)

Operating income 75,557 170,146 (10,624) (21,644)

17 Net result in Joint ventures 16,954 27,261 - - 8 Financial income 11,878 19,700 16,879 175,107 9 Financial expenses (28,389) (57,772) (94,439) (51,755)

Result before tax 76,000 159,335 (88,184) 101,708

10 Income tax 3,633 (4,603) 4,745 (4,188)

Result for the year 79,633 154,732 (83,440) 97,519

Attributable to:The J. Lauritzen Group 74,616 149,468 Minority shareholders´ share of result in subsidiaries 5,017 5,264

79,633 154,732

Proposed allocation of the result:Proposed dividend - - Transferred to other reserves (83,440) 97,519

(83,440) 97,519


69

Group Parent companyNote USD '000 2009 2008 2009 2008

Net income recognised in the Income Statement 79,633 154,732 (83,440) 97,519

Other comprehensive incomeExchange rate adjustments concerning foreign companies 143 (1,288) - - Fair value adjustment of hedging instruments during the year 3,352 (10,544) 3,352 (10,544) Hedging instruments transferred to the income statement 4,158 (130) 4,158 (130) Tax on other comprehensive income - - - - Other comprehensive income net of tax 7,653 (11,963) 7,510 (10,675)

Total comprehensive income 87,286 142,769 (75,929) 86,845

Attributable to:The J. Lauritzen Group 82,269 137,506 Minority shareholders´ share of result in subsidiaries 5,017 5,264

87,286 142,769

Proposed allocation of the result:Proposed dividend - - Transferred to other reserves (75,929) 86,845

(75,929) 86,845

Statement of comprehensive income


70

Balance sheet assets

GroupNote USD '000 2009 2008 2009 2008

ASSETSNon current assets

Intangible assets11 Goodwill 0 1,735 - -

0 1,735 - -

Vessels, property and equipment12 Vessels 1,037,704 572,429 - - 13 Land and buildings 2,934 3,009 - - 14 Machinery, tools and equipment 15,896 11,160 1,415 1,423 15 Vessels under construction 444,876 658,542 - -

1,501,410 1,245,139 1,415 1,423

Financial assets16 Investments in subsidiaries - - 439,230 512,623 17 Investments in Joint ventures 121,321 118,298 - - 10 Deferred tax assets 3,580 3,940 3,513 3,881

Shares available for sale 3,530 3,411 3,530 3,411 Receivables from Joint ventures 25,098 - - -

18, 22 Other receivables 15,960 26,959 - - 169,488 152,608 446,273 519,915

Total non current assets 1,670,899 1,399,482 447,689 521,339

Parent company

Current assets

Bunkers 1,911 1,612 - - ReceivablesTrade receivables 10,249 16,811 - -

18, 22 Other receivables 64,448 115,467 23,842 36,717 Receivables from affiliated companies - - 621,932 341,834 Receivables from Joint ventures 60 5,921 58 56

18 Prepayments 49,015 9,751 8,224 47 123,771 147,950 654,056 378,654

23 Securities 13,103 35,192 13,103 35,192

27 Cash and bank deposits 205,011 144,370 171,867 38,159

343,795 329,124 839,026 452,006

12, 15 Assets held for sale 173,709 39,049 - -

Total current assets 517,505 368,172 839,026 452,006

Total assets 2,188,403 1,767,654 1,286,715 973,344


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Balance sheet liabilities

Note USD '000 2009 2008 2009 2008

LIABILITIESEquityShare capital 60,633 60,633 60,633 60,633 Reserve for hedging instruments (3,164) (10,675) (3,164) (10,675) Reserve for exchange rate adjustments (2,413) (2,556) - - Other reserves 1,070,571 995,954 425,552 508,991 Proposed dividend - - - - JL's share of equity 1,125,626 1,043,357 483,021 558,950 Minority shareholders' share of equity 4,873 4,356 - -

19 Total Equity 1,130,499 1,047,713 483,021 558,950

Non current liabilities20 Provisions 3,517 31,442 - - 21 Interest bearing debt 882,612 381,702 613,966 297,202

Total non current liabilities 886,129 413,144 613,966 297,202

Current liabilities21 Interest bearing debt 53,809 23,794 13,033 -

Trade payables 22,480 14,757 2,332 13,541 Other payables 72,836 184,867 37,458 52,858

20 Provisions 13,139 75,327 - - Prepayments 3,272 2,114 - - Debt to parent company - 1 - 1 Debt to affiliated companies - - 131,556 45,882

10 Corporate tax 6,239 5,937 5,348 4,911 Total current liabilities 171,775 306,798 189,728 117,193

Parent companyGroup

Total current liabilities 171,775 306,798 189,728 117,193

Total liabilities 1,057,903 719,942 803,694 414,395

Total equity and liabilities 2,188,403 1,767,654 1,286,715 973,344

22 Financial instruments and financial risks24 Leasing28 Mortgages29 Contingent liabilities30 Contractual commitments31 Related parties32 Events after the balance sheet date33 New accounting regulations


72

Equity Statement

Group USD '000 Reserve for Reserve for ResultShare hedging exchange carried Proposed Minoritycapital instruments rate adj. forward dividend Total interests Total

Equity 1/1 2008 60,633 - (1,268) 846,486 85,368 991,220 4,742 995,962 Total comprehensive income - (10,675) (1,288) 149,468 - 137,506 5,264 142,769 Paid dividend - - - (85,368) (85,368) (5,650) (91,018) Proposed dividend - - - - - - - Equity 31/12 2008 60,633 (10,675) (2,556) 995,954 - 1,043,357 4,356 1,047,713

Total comprehensive income - 7,510 143 74,616 - 82,269 5,017 87,286 Paid dividend - - - - - - (4,500) (4,500) Proposed dividend - - - - - - - - Equity 31/12 2009 60,633 (3,164) (2,413) 1,070,571 - 1,125,626 4,873 1,130,499

Parent Company USD '000 Reserve for Reserve for ResultShare hedging exchange carried Proposed Minoritycapital instruments rate adj. forward dividend Total interests Total

Equity 1/1 2008 60,633 - - 411,472 85,368 557,474 - 557,474

Total comprehensive income - (10,675) - 97,519 - 86,845 - 86,845 Paid dividend - - - - (85,368) (85,368) - (85,368) Proposed dividend - - - - - - - - Equity 31/12 2008 60,633 (10,675) - 508,991 - 558,950 - 558,950

Total comprehensive income - 7,510 - (83,440) - (75,929) - (75,929) Paid dividend - - - - - - - - Proposed dividend - - - - - - - - Equity 31/12 2009 60,633 (3,164) - 425,552 - 483,021 - 483,021


73

Cash Flow Statement

Note USD '000 2009 2008 2009 2008

Result of operating income 75,557 170,146 (10,624) (21,644) 7 Depreciation carried back 76,428 142,563 8 8

25 Adjustments (79,978) (117,024) 25,041 6,813

26 Change in working capital (79,272) 109,794 (216,337) 876 Cash flow from operations before financial items (7,265) 305,479 (201,912) (13,947) Ingoing financial payments 6,673 19,700 4,796 9,946 Outgoing financial payments (27,656) (24,571) (20,683) (51,755) Cash flow from ordinary operations (28,247) 300,608 (217,800) (55,756)

10 Paid corporate tax 4,133 (708) 5,255 (306)

Cash flow from operating activities (24,114) 299,900 (212,545) (56,062)

12 Purchase of vessels (431,975) (237,686) - - 15 Payments on vessels under construction (102,069) (469,459) - - 13 Purchase of land and buildings - (1,612) - - 14 Purchase of machinery and equipment (6,694) (5,599) - (1,288) 17 Purchase of Joint ventures (4,556) (36,596) - -

Sale of vessels 91,636 423,557 - - Sale of other non current assets 481 307 - - Sale of shares - 7,232 - 7,232

16 Increase of share capital in subsidiaries - - (363) (70,047) Purchase and sales of securities 26,819 61,878 26,819 61,878 Cash and cash equivalents pledged as security for debt (32,950) - (20,300) - Dividend received from subsidiaries - - - 150,000

17 Dividend received from Joint ventures 4,288 20,666 - -

Cash flow from investment activities (455,021) (237,311) 6,156 147,775

Financial receivables (14,098) 11,373 - - 21 Instalment on long-term debt (189,681) (17,982) (68,749) - 21 Proceeds from loans 711,688 382,477 389,629 296,411

Dividend paid - (85,368) - (85,368)

Cash flow from financing activities 507,909 290,499 320,880 211,043

Changes for the year in cash and cash equivalents 28,774 353,089 114,491 302,756 Cash and cash equivalents at beginning of year 144,370 (208,968) 38,159 (264,850) Currency adjustments on cash and cash equivalents (1,083) 249 (1,083) 253

27 Cash and cash equivalents at the end of the year 172,061 144,370 151,567 38,159

Undrawn committed credit facilities at end of year*) 281,400 213,367 258,200 213,367

Financial ressources at the end of the year 453,461 357,737 409,767 251,526

*) Of the USD 281.4m undrawn credit facilities at the end of 2009 USD 258.2m (2008: USD 0m) is committed to financing ofspecified vessel deliveries during 2010. After year end additional financing of 2011 deliveries of the equivalent of USD 160m asagreed to in 2009 has been committed.

Group Parent company


74

Notes

Note 1 Accounting policies

J. Lauritzen A/S is a private limited company with domicile in Denmark. The Annual Report for the period 1 January 2008 – 31 December 2009 comprise consolidated financial statements for J. Lauritzen A/S and its subsidiaries (The Group) as well as separate financial statements for the parent entity.

The annual report has been prepared in accordance with Inter-national Financial Reporting Standards (IFRS) as adopted by the EU and additional Danish disclosure requirements for annu-al reports of reporting class C large enterprises, see the statu-tory order on the adoption of IFRS issued pursuant to the Dan-ish Financial Statements Act. In addition, the annual report has been prepared in compliance with the International Financial Reporting Standards issued by the IASB.

New financial reporting standardsIn 2009, JL has adopted the following new or revised standards and interpretations endorsed by EU effective for the accounting period beginning on 1 January 2009:

IAS 1 (Revised 2007) Presentation of Financial Statements IAS 23 (Revised 2007) Borrowing costs IFRS 8 Operating Segments, IFRS 2 (Revised 2008) Share-based Payment Amendments to IAS 32 and IAS 1 (2008): Puttable Financial In-struments and Obligations Arising on liquidationAmendments to IFRS 1 and IAS 27 (2008): Cost of an invest-ment in a Subsidiary, Jointly Controlled Entity or AssociateAmendments to IFRS 7 (2009): Improving Disclosures about Fi-nancial InstrumentsPart of ‘Improvements to IFRSs’ (2008) with effective dates 1 January 2009IFRIC’s 12, 13, 15, 16, 17 and 18

IAS 1 changes the primary statements by requiring a Statement of Comprehensive Income and changes to the Equity State-ment. IFRS 8 effects the disclosure on segment to a minor ex-tend, whereas amendments to IFRS 7 enhances the disclosure on liquidity risk and fair value disclosure. None of the new stand-ards and interpretations has affected recognition or measure-ment in the Financial Statements of 2009.

Basis of preparation The financial statements are presented in US dollars, rounded to the nearest thousand. They are prepared under the historical cost convention, except that the following assets and liabilities are stated at their fair value:

Derivative financial instrumentsInvestments held for tradingInvestments available for sale

The accounting policies set out below have been applied con-sistently by all JL entities and to all periods presented in these consolidated financial statements.

Basis of consolidation The Annual Report comprises the Parent Company, J. Lau-ritzen A/S, and subsidiaries in which the Parent Company has directly or indirectly the power to govern the financial and oper-ating policies. This is normally accomplished by holding more than 50% of the voting rights. The existence and effect of poten-tial voting rights that are currently exercisable or convertible are considered when assessing whether JL has control or signifi-cant influence over another entity.

Enterprises in which JL has a significant influence, but not con-trol are classified as associates.

Joint ventures are recognised in the consolidated financial statements, and in the financial statements of the parent com-pany using the equity method.

The Consolidated Financial Statements are prepared on the basis of the financial statements of the Parent Company and its subsidiaries, by combining items of a uniform nature and eliminating inter-company transactions and balances, and are based on financial statements prepared in compliance with JL’s accounting policies.

Acquisitions, disposals and entities formed during the year are included in the financial statements during the period of JL’s control or significant influence. Comparative figures are not ad-justed for acquisitions. Disposals or liquidations are presented as discontinued operations.


75

Notes

On acquisition of businesses, the purchase method is applied, according to which the identifiable assets, liabilities and contin-gent liabilities acquired are measured at their fair values on the date of acquisition. The excess of the cost of acquisition over the fair value of JL’s share of the identifiable assets, liabilities and contingent liabilities acquired are recorded as goodwill. If the cost of acquisition is less than the fair value of the net as-sets of the business acquired (negative goodwill), the difference is recognised directly in the income statement.

Gains or losses from the disposal or liquidation of subsidiaries or associates are stated as the difference between the proceeds from disposal or liquidation and the book value of the net assets at the date of disposal or liquidation. This includes any goodwill as well as any anticipated disposal or liquidation costs.

Translation of foreign currencies Items included in the financial statements of each of JL’s enti-ties are measured using the currency of the primary economic environment in which the entity operates (the functional curren-cy). The consolidated and the parent company’s financial state-ments of JL are stated in USD which is both JL’s functional and presentation currency.

Foreign currency transactions are translated into the functional currency at the exchange rate of the date when initially recog-nised. Gains and losses arising between the exchange rate of the transaction date and that of the settlement date are recog-nised in the income statement under financial items.

Receivables, payables and other monetary items in foreign cur-rencies that have not been settled at the balance sheet date are translated at the exchange rates then prevailing. Any differenc-es between the exchange rates at the balance sheet date and the transaction date rates are recognised in the income state-ment under financial items.

The results and financial position of any JL entity that has a functional currency different from JL’s presentation currency are translated into the presentation currency as follows:

Assets and liabilities, including goodwill and fair value adjust-ments arising on consolidation are translated at the closing rates at the date of the balance sheet.

Income and expenses for each income statement are translated at exchange rates approximating the exchange rate of the date of transaction date, and all resulting exchange differences are recognised as a separate component of equity.

Exchange differences arising from the translation of the net in-vestment in foreign subsidiaries or associates, and of borrow-ings or other currency instruments relating to hedging such in-vestments are recognised directly in the translation reserve of equity. Exchange differences are released to the income state-ment upon disposal of the net investment.

Derivative financial instruments and hedging activities JL uses derivative financial instruments to hedge its exposure to foreign exchange risks, interest rate risks and price risks arising from operational, financing and investment activities. In accord-ance with its treasury policy, JL does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

Derivatives are recognised initially at fair value. Subsequently, derivatives are re-measured at fair value. The gain or loss on re-measurement to fair value is recognised immediately in the in-come statement, unless the derivative is classified as and quali-fies for hedge accounting, where recognition of any fair value changes depends upon the nature of the item being hedged.

JL documents at the inception of the transaction the relation-ship between the hedge and the items hedged, as well as its risk management objectives and strategy for undertaking vari-ous hedge transactions. JL also documents from start to finish of a hedge whether the derivatives used in the hedge are highly effective in offsetting changes in the fair values or cash flows of the hedged items.

Fair value hedgeChanges in the fair value of derivatives designated as and quali-fying for recognition as a hedge of the fair value of a recognised asset or liability are recognised in the income statement togeth-er with changes in the fair value of the hedged asset or liability.


76

Cash flow hedgeWhere a derivative financial instrument is designated as a hedge of a highly probable forecasted transaction, the effec-tive part of any gain or loss on it is recognised directly in equity. When the forecasted transaction subsequently is realised, the associated cumulative gain or loss is removed from equity and recognised in the income statement in the same period or pe-riods during which the hedged forecasted transaction affects profit or loss. The ineffective part of any gain or loss is recog-nised in the income statement immediately.

When a hedging instrument expires or is sold, terminated or ex-ercised, or the entity revokes designation of the hedge relation-ship but the hedged forecast transaction still is expected to oc-cur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised in the income statement im-mediately.

Net investment hedgeDerivatives used to hedge net investments in foreign subsidiar-ies, associated companies or joint ventures are accounted for similarly to cash flow hedges. Any gain or loss on the hedg-ing instrument relating to the effective portion of the hedge is recognised in equity; the gain and loss relating to the ineffec-tive portion is recognised immediately recognised in the income statement.

Derivatives that do not qualify for hedge accounting For derivatives that do not qualify for hedge accounting, chang-es in fair value are recognised in the income statement as they occur.

Methods for determination of fair value A number of the Group’s accounting policies and disclosures re-quire the determination of fair value. Fair value has been deter-mined for measurement and/or disclosure purposes based on the following methods:

Vessels Fair value, used in the annually impairment testing, has been determined by independent brokers.

Listed sharesFor listed shares the fair value is determined as the stock ex-change closing price at the balance sheet date.

The fair value of investments in bonds is based on the closing price at the balance sheet date obtained directly from the mar-ket or from third parties. The fair value of bond related products where an active and liquid market does not exist, is obtained by using a “best approximation” value calculated by the counter-party with whom JL has made the relevant trade.

Unlisted sharesUnlisted shares are measured at cost if no reliable valuation model can be applied.

DerivativesThe fair values of derivative instruments are based on their list-ed market price, if available, or estimated using appropriate market rates prevailing at the balance sheet date. These are based on rates obtained from third parties (banks, oil compa-nies, brokers and trading houses).

Non-derivative financial liabilities and non-current receivablesThe fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market inter-est rate at the balance sheet date.

Segment information Segment information on key business areas is disclosed in line with JL’s internal financial management, risks and accounting policies.

JL has only one geographical segment because JL considers the global market as a whole and individual vessels are not lim-ited to specific parts of the world.

Assets in a segment comprise those that are directly attribut-able to the segment’s operations, including intangible assets, vessels, property, equipment, investments in associated com-panies and joint ventures, inventories, trade and other receiva-bles, prepayments and cash.


77

Liabilities in a segment comprise those that are directly em-ployed in the segment’s operation, including trade payables, ac-cruals and other liabilities.

Income statementRevenues Revenues comprise freight and demurrage revenues from the vessels, and miscellaneous income. Revenues are recognised in the income statement as services are delivered. Uncomplet-ed voyages are recognised with the share related to the finan-cial year. Earnings from vessels which are engaged in jointly controlled operation are recognised in revenue on a net distri-bution basis.

In addition revenue comprises changes in fair value on forward freight agreements (FFA) used as hedging of JL’s freight in-come. Hedge accounting is applied on FFA’s.

Operating cost of vessels Operating cost of vessels includes maintenance and repairs, in-surance of hulls and machinery, consumption of lubricants and supplies etc.

Other operating costsOther operating costs include bunker oil, port costs, agent’s commissions and other voyage related costs. Furthermore oth-er operating costs include fair value changes on financial bun-kers contracts which are entered into for the purpose of hedging JL’s bunkers costs as hedge accounting is not applied for these transactions.

Results in associated companies and joint ventures The proportionate share of the net result after tax in associated companies and joint ventures, after the elimination of inter-com-pany profits/losses is recognised in the consolidated income statement of JL.

Financial items Financial items include interest income and expense, realised and unrealised exchange gains and losses, financial expenses in respect of finance leases, adjustments to the value of securi-

ties and certain financial instruments and other financial income and expenses.

Borrowing costs related to the financing of assets under con-struction are capitalised as part of the cost of the asset.

In the income statement of the parent company dividends re-ceived during the year from subsidiaries, associated companies and joint ventures are shown under financial income.

Income taxIncome tax consists of tax calculated according to the regula-tions of the Danish Tonnage Tax Act for shipping activities and according to general tax regulations for other activities, as well as adjustments related to deferred tax. Income tax is recog-nised in the income statement except to the extent that it relates to items recognised directly to equity, in which case it is recog-nised in equity.

Balance sheetGoodwill All business combinations are accounted for by applying the purchase method. Goodwill represents the excess of acquisi-tion price over the net fair value of acquired identifiable assets and liabilities arising on acquisition of subsidiaries, associates and joint ventures.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment. In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment in the associate or joint venture.

Vessels, property and equipment Vessels Vessels are measured at cost less accumulated depreciation and accumulated impairment losses. Cost of vessels acquired by way of finance leases are stated at the lower of fair value, and the present value of the minimum lease payments at the incep-tion of the lease

Notes


78

Costs relating to dry dockings are capitalised and depreciated over the period between dockings, which range from 30 to 60 month. Rebuilding of vessels is capitalised if the rebuilding is in-tended to extend the service life and/or improve the earning po-tential. Rebuilding is depreciated over the expected service life of the investment.

Vessels under construction are measured at cost incurred until the time the vessel is taken into service.

The costs of Accommodation and Support Vessels (ASV’s) are divided into components with minor wear, such as hulls and en-gines, and component with hard wear, such as part of the ac-commodation area. Vessels are depreciated on a straight line method to an esti-mated scrap value. The estimated scrap value and estimated service life of a vessel are assessed annually and adjusted if appropriate.

The carrying amounts of vessels are tested for impairment an-nually and are written down to the recoverable amount if this is lower than the carrying amount. The recoverable amount of is the higher of the fair value less costs to sell and the value in use. Broker valuations are used to estimate Fair value less costs to sell. Value in use is calculated as present value of future cash flows to be derived from the vessels during their useful life including charter agreements and COA’s and estimated spot rates for open ship days. The impairment test is carried out on the lowest cash generating unit. The cash generating unit can be a single vessel or a group of vessels and directly attributable other assets and contracts when the cash inflows from the ves-sels are not largely independent of those from other vessels.

LandLand is measured at cost.

Buildings Buildings are measured at cost less accumulated depreciation and accumulated impairment losses.

Machinery, tools and equipment Machinery, tools and equipment are measured at cost less ac-cumulated depreciation and accumulated impairment losses.

Depreciation The straight-line method of depreciation is applied and the ex-pected useful life of the assets is as follows:

Asset Years

Bulk carriers 25

Gas carriers 25

Product tankers 25

Shuttle tankers 25

Accommodation and Support vessels, components with minor wear

25

Accommodation and Support vessels, components with hard wear

10-15

Dry dockings 3-5

Buildings 50

Machinery, tools and equipment 5-10

Gains and losses on the disposal of tangible assets are calculat-ed as the difference between the sales price less cost of sales and the net book value at the time of sale. Gains and losses on the disposal of machinery and equipment are recognised in the income statement under the line item “other sales and adminis-trative costs”. Gains and losses on the disposal of vessels are recognised in the income statement as a separate line item.

Investments in associates and joint ventures – con-solidated financial statements In JL’s consolidated financial statements, investments in associ-ates and joint ventures are recognised according to the equity method of accounting.

Any goodwill resulting from the acquisition is included in the car-rying value of the investment. It is tested for impairment as de-scribed below.


79

Associates and joint ventures with negative equity are meas-ured at USD 0 (nil), unless JL has a legal or constructive obliga-tion to cover the negative balance of the associate.

Investments in subsidiaries, associates and joint ventures – parent company financial statements In the financial statements of the parent company, investments in subsidiaries, associates and joint ventures are carried at cost less accumulated impairment losses. Dividends are recognised in the income statement as received.

Impairment The carrying amount of vessels and goodwill are tested annu-ally for impairment.

The carrying amounts of other non-current assets, other than deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated based on either discounted future expected cash flows (value in use) or broker’s valuations (fair value less costs to sell).

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income state-ment.

Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

In discounting the estimated future cash flows, JL uses its risk adjusted weighted average cost of capital (WACC).

Inventories Bunker oil is measured at cost according to the FIFO princi-ple. Major spare parts purchased and stored ashore for sub-sequent use are measured at cost less individually assessed write-down. Other inventories are recognised at the lower of cost or net realisable value.

Financial assetsJL classifies its investments in the following categories: Finan-cial assets at fair value through profit or loss (financial deriv-atives), Loans and receivables and Available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the clas-sification of its investments on initial recognition and re-evalu-ates this designation at every reporting date to the extent that such a designation is permitted and required.

Financial assets at fair value through profit or loss Comprise financial derivatives on which hedge accounting is not applied and securities which is classified as held for trad-ing. Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are included in Trade receiva-bles and Other receivables in the Balance sheet. Trade receiv-ables and Other receivables are stated at amortised cost less allowances for doubtful trade receivables. The allowances are based on an individual assessment of each receivable.

Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivatives that are not classified held for trading. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. Marketable securi-ties under current assets are classified as available-for-sale.

Recognition and measurement of financial assetsPurchases and sales of investments are recognised on the set-tlement date. Investments are initially recognised at fair value plus transaction costs for all financial assets not classified as fair value through profit or loss.

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair val-ue. Loans and receivables are carried at amortised cost using the effective interest method.

Unrealised gains and losses arising from changes in the fair value of financial assets classified as available-for-sale are rec-

Notes


80

ognised in equity. When financial assets classified as availa-ble-for-sale are sold or impaired, the accumulated fair value ad-justments are included in the Income statement as gains and losses from available-for-sale financial assets.

Prepayments Prepayments recognised under assets include payments re-lating to costs in subsequent periods after the balance sheet date.

Equity Proposed dividend is recognised as a separate item under eq-uity until approved at the Annual General Meeting, when it is recognised as a liability.

Liabilities Mortgage debt and other interest bearing debt to credit insti-tutions are initially recognised as the proceeds received less any transaction costs incurred. Subsequently, financial liabilities are measured at amortised cost using the effective interest rate method, such that the difference between the proceeds and the redemption value is recognised in the income statement over the lifetime of the loan.

Financial liabilities also include lease obligations on finance leases.

Trade payables and other amounts payable are measured at amortised cost.

ProvisionsA provision is recognised in the balance sheet when JL has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and it is possible make a relia-ble estimate of amount of the provision. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assess-ments of the time value of money and, where appropriate, the risks specific to the liability.

Accruals Accruals include prepayments regarding income relating to pe-riods after the balance sheet date.

Corporate and deferred taxCorporate tax is the expected tax payable on the taxable in-come for the year, using tax rates enacted or substantially en-acted at the balance sheet date, and any adjustment to tax pay-able in respect of previous years.

Deferred tax is provided using the balance sheet liability meth-od, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purpos-es and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deduct-ible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, nor differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of re-alisation or settlement of the carrying amount of assets and li-abilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are re-duced to the extent that it is no longer probable that the related tax benefit will be realised.

J. Lauritzen A/S is jointly taxed with various Danish subsidiaries to the commercial foundation Lauritzen Fonden.

Cash flow statement The cash flow statement has been prepared according to the in-direct method and shows the cash flows from operating, invest-ing and financing activities for the year.

Cash flows from operating activities are calculated as the re-sults for the year as adjusted for non-cash operational items, changes in working capital and corporate tax payments.

Cash flows from investment activities cover receipts or pay-ments related to acquisition and disinvestment of companies and/or activities, transactions relating to non-current assets and purchase or sale of securities.


81

Notes

Cash flows from financing activities comprise changes in the size and mix and the JL’s share capital including related costs, raising and re-payment of interest bearing debt, plus payment of dividend to shareholders.

Cash and cash equivalents include bank deposits and short term deposits that without restriction can be exchanged into cash funds and where there is insignificant risk of value fluctua-tions, with the deduction of short term bank loans.

Note 2 Accounting estimates and judgments

The preparation of the financial statements in conformity with IFRS requires management to make estimates and judgments that affect the reported carrying amounts of assets and liabili-ties and disclosure of contingent assets and liabilities at the date of the financial statements and the reported performance. Man-agement bases its estimates on historical experience and vari-ous other assumptions and sources that are believed to be rea-sonable. Actual results could differ from those estimates.

JL believes the following are the significant accounting esti-mates and related judgments used in the preparation of its con-solidated financial statements.

Critical accounting estimates and judgmentsEstimated service life, scrap value and recoverable amount of vessels and vessels under construction:

The estimated service life and scrap value of the vessels are assessed annually and adjusted if appropriate. Irrespective of indications of impairment the recoverable values of vessels and of vessels under construction are determined minimum annu-ally based on broker’s valuations and calculated values in use. Vessels which are held for sale are measured at the lower of the carrying amount and fair value based on broker’s valuation less costs to sell. Significant changes in the estimated service life and scrap values and the result of the impairment test of ves-sels and of vessels under construction may have an impact on operating income.

The carrying amount of vessels is disclosed in note 12 and the carrying amount of payments for vessels under construction is disclosed in note 15. Contractual commitments regarding ship-yard contracts are disclosed in note 30. The key assumptions for the calculation of the value in use are the estimated future earnings and operating costs, the identified cash-generating units (CGU) and a risk adjusted weighted aver-age cost of capital of 7% (2008: 7%).

Compared to 2008 the aggregation of assets for identifying cash generating units has been modified in accordance with the current organisational structure and operation of the fleet and the general market practice. In 2008 impairment tests of vessels were carried out on a vessel by vessel basis. In 2009 vessels are aggregated into cash generating units based on the organisational structure and vessel types, comprising fully and partially owned vessels as well as vessels under charter con-tracts re. below.

In 2009 the product tanker market experienced a severe down-turn resulting in declining broker’s valuations and estimated fu-ture income and thus also values in use. In the same period, the dry bulk market recovered partly from the downturn in the 4th quarter of 2008. The impairment test as at 31 December 2009 resulted in write-downs to the recoverable amount of product tankers; product tankers owned by joint ventures as well as product tankers under construction, whereas write-downs on bulk carriers were reversed. Goodwill related to the product tanker operation was also written-off. Furthermore, one prod-uct tanker and two bulk carriers were transferred to held for sale classification in 2009 resulting in impairment losses.

Except for the product tankers no other vessels or vessels un-der construction were determined as at risk of impairment as at 31 December 2009 and no reasonably possible short term changes in key assumptions will cause other vessels or other vessels under construction to be impaired.

Provision for onerous charter contracts:The charter commitments for operating leased vessels are dis-closed in note 24. The estimated benefits to be derived by JL from employing its chartered fleet of vessels are assessed mini-


82

mum annually. The chartered vessels are allocated to CGU’s using the same principles as for fully and partially owned ves-sels. A provision for onerous charter contract is recognised in case the net present value of the estimated future cash flows for the lowest cash generating unit, in which the chartered ves-sel is included, is negative and provided the net present value of estimated future cash flows for the specific chartered vessel is negative.

Due to the severe downturn on the product tanker market, pro-visions have been recognised to cover onerous time charters of products tankers, while provisions related to time charters of bulk carriers have been reversed due to the recovery of the bulk market.

Write-downs on vessels etc. and provisions for onerous con-tracts are summarized below:

Reference is made to note 11 “Goodwill”, note 12 “Vessels”, note 15 “Vessels under construction” and note 20 “Provisions”.

Critical accounting judgments in applying JL’s ac-counting policies

Leases: The Group enters into different contracts regarding chartering (leasing) of vessels. The majority of these contacts can easily be categorized as either operational or financial leas-es. However, some contracts may require judgment as to the substance of the agreement in order to recognise and measure them in accordance with JL’s accounting policies.

Joint ventures: Categorising of corporations and ownership in-terests as subsidiaries, associates or joint ventures is based on managerial judgment.

USDm Assets held for saleVessels and vesselsunder construction Onerous contracts Joint ventures Goodwill Total

Writedown Reversal

Writedown Reversal Provision Reversal

Writedown Reversal

Writedown

impairmentloss, net

2009Lauritzen Bulkers 22.6 (21.3) 20.2 (51.1) (24.5) (9.0) (63.1)Lauritzen KosanLauritzen Offshore Serv.Lauritzen Tankers 2.6 52.9 9.3 5.1 1.7 71.6Non reportable segm. 4.5 4.5Total Group 25.2 (21.3) 77.5 (51.1) 9.3 (24.5) 5.1 (9.0) 1.7 13.0

2008Lauritzen Bulkers 21.3 59.6 90.4 18.9 190.2Lauritzen KosanLauritzen Offshore Serv.Lauritzen Tankers 16.0 16.0Non reportable segm.Total Group 37.3 59.6 90.4 18.9 206.2


83

NotesNOTE 3 Segment information

USD '000 Lauritzen Lauritzen Lauritzen Lauritzen Total Non- Un- TotalBulkers Kosan Offshore Tankers reportable reportable allocated Group

Services segments segments2009Revenue 270.7 114.1 22.0 62.8 469.6 13.3 0.0 482.9Result before depreciation 117.4 34.6 4.0 (9.8) 146.2 0.5 (11.9) 134.9Depreciations (11.3) (25.6) (5.2) (3.3) (45.4) (0.7) (14.0) (46.2)Impairment losses 29.7 - - (55.5) (25.8) (4.5) - (30.3)Profit and loss on sale of assets 17.0 0.2 0.0 0.0 17.2 (0.1) - 17.1Operating income 152.8 9.1 (1.3) (68.5) 92.2 (4.7) (11.9) 75.6Net result in Joint ventures 19.6 1.9 - (4.5) 17.0 - - 17.0Result before tax 168.0 9.2 (7.1) (74.2) 95.9 (3.7) (16.2) 76.0Income tax for the year (0.5) (0.0) (0.3) (0.5) (1.3) 0.6 4.3 3.6Result for the year 167.5 9.2 (7.4) (74.7) 94.6 (3.1) (11.8) 79.6Hereof minority interest 0.0 0.0 0.0 5.0 5.0 0.0 0.0 5.0

Other material non-cash items included in the result:Unrealized gains/loss on FFA's 68.0 - - - 68.0 - - 68.0Provisions, net 90.4 1.5 0.0 (9.3) 82.6 7.5 - 90.1Result excl. other non-cash items 9.2 7.7 (7.4) (65.4) (56.0) (10.7) (11.8) (78.5)

Non current assets 690.3 442.1 444.1 76.8 1,653.4 8.6 9.0 1,670.9Investments in Joint ventures 103.9 16.2 0.0 0.5 120.6 0.0 0.5 121.1Current assets 192.5 37.2 35.0 83.1 347.8 21.7 148.0 517.5Total assets 882.8 479.3 479.2 159.9 2,001.2 30.3 156.9 2,188.4Liabilities 205.5 41.9 321.5 14.6 583.5 36.5 437.9 1,057.9

Net Assets 677.3 437.4 157.6 145.3 1,417.7 (6.3) (280.9) 1,130.5

Average number of employees 45 354 60 75 533 120 95 748

Profit margin 56.5% 8.0% (5.8)% (109.0)% 19.6% (35.7)% N/A 15.7%R t i t d it l 28 8% 2 4% (0 4)% (47 3)% 7 1% N/A N/A 6 1%Return on invested capital 28.8% 2.4% (0.4)% (47.3)% 7.1% N/A N/A 6.1%Investments during the year 302.7 45.4 135.5 49.3 532.9 7.8 0.0 540.7Invested Capital - Year end 816.7 470.9 359.8 125.6 1,773.1 (14.7) 55.3 1,813.7Invested capital - Average 598.0 459.6 315.0 154.5 1,527.2 (14.9) 7.1 1,519.4


84

NOTE 3 Segment information (continued)

USD '000 Lauritzen Lauritzen Lauritzen Lauritzen Total Non- Un- TotalBulkers Kosan Offshore Tankers reportable reportable allocated Group

Services segments segments2008Revenue 432.7 127.8 1.7 85.6 647.9 17.8 0.0 665.8Result before depreciation 120.8 44.0 (0.1) 18.9 183.7 (6.7) (18.2) 158.9Depreciations (19.3) (20.7) (0.7) (4.0) (44.7) (1.0) (0.0) (45.7)Impairment losses (80.9) - - (16.0) (96.9) - - (96.9)Profit and loss on sale of assets 117.0 18.9 - 10.7 146.6 7.2 - 153.8Operating income 137.6 42.3 (0.7) 9.6 188.8 (0.4) (18.2) 170.1Net result in Joint ventures 26.0 1.3 - (0.0) 27.3 - - 27.3Result before tax 157.0 38.7 (7.2) 2.4 190.9 0.2 (31.8) 159.3Income tax for the year (0.0) (0.8) 0.0 0.7 (0.1) 0.1 (4.6) (4.6)

Result for the year 157.0 37.9 (7.2) 3.1 190.8 0.3 (36.4) 154.7

Hereof minority interest 0.0 0.0 0.0 5.3 5.3 0.0 0.0 5.3

Other material non-cash items included in the result:Unrealized gains/loss on FFA's (90.0) - - - (90.0) - - (90.0)Provisions, net (90.4) (3.4) - - (93.8) 7.3 - (86.5)Result excl. other non-cash items 337.4 41.3 (7.2) 3.1 374.6 (7.0) (36.4) 331.2

Non current assets 536.0 421.1 313.8 91.7 1,362.5 27.7 9.2 1,399.5Investments in Joint ventures 98.4 14.5 0.0 4.9 117.8 0.0 0.5 118.3Current assets 123.7 56.5 5.1 116.7 302.0 21.7 44.5 368.2Total assets 659.7 477.6 318.8 208.4 1,664.5 49.4 53.7 1,767.6Liabilities 289.0 19.7 46.2 11.9 366.8 50.2 302.9 719.9

Net Assets 370.7 457.8 272.6 196.5 1,297.7 (0.8) (249.1) 1,047.7

Average number of employees 42 254 19 87 401 170 91 662

P fit i 31 8% 33 1% (43 1)% 11 2% 29 1% (2 3)% N/A 25 6%Profit margin 31.8% 33.1% (43.1)% 11.2% 29.1% (2.3)% N/A 25.6%Return on invested capital 39.5% 10.1% (0.5)% 4.4% 17.9% N/A N/A 17.1%Investments during the year 244.1 192.0 255.5 21.4 713.1 0.0 1.3 714.3Invested Capital - Year end 379.3 448.3 270.3 183.3 1,281.2 (15.3) (40.8) 1,225.1Invested capital - Average 414.5 432.2 145.1 218.1 1,209.9 (19.1) (34.9) 1,155.9

The reportable segments in the J. Lauritzen Group consist of the four business units Lauritzen Bulkers (Bulk carriers), Lauritzen Kosan (Gascarriers), Lauritzen Tankers (Product tankers) and Lauritzen Offshore Services (ASV and shuttle tankers). The four reportable segments isidentical with how the J. Lauritzen is organized around the different services in the four segments. Each business unit is operatedindependently from the other business units, as each business unit services different customers and demands different types of vessels.

The revenue reported represents revenue from external customers. There are no inter-segment sales in 2009 or 2008.

The accounting policies of the reportable segments are the same as the Group's accounting policies described in note 1. Unallocated incomeand expenses include group administration costs, finance costs and central service not allocated to the business units. Non-reportableoperating segments include Fleet management, Lauritzen Reefers and other miscellaneous activities. Unallocated assets and liabilities includemainly financial assets and financial liabilities not allocated to reportable segments. No vessels in any segment is limited to specificgeographical area of the world and JL consider the global market as a whole hence no geographical information is relevant or available.

No customer information is given as J. Lauritzen is not reliant on any single major customers.


85

Note 4 Fair value changes on financial contractsGroup

USD '000 2009 2008 2009 2008

The fair value changes on:Forward Freight Agreement contracts included in revenue are 18,244 (29,066) - - Financial bunkers contracts included in other operating costs are (319) (528) - -

Parent Company

Note 5 Staff costs, office and fleet

USD '000 2009 2008 2009 2008

Staff costs include:Wages and salaries 62,478 70,949 13,827 18,013 Pensions (defined contribution plan) 3,785 3,937 1,186 1,686 Social security 1,351 1,164 58 65 Contract labour 371 329 304 329

67,985 76,379 15,375 20,092

Remuneration to J. Lauritzen A/S'Executive Management - salaries 2,200 3,394 2,200 3,394 Executive Management - pensions 317 191 317 191 Executive Management - long term employment bonus 186 1,651 186 1,651 Board of Directors 497 519 497 519

3,200 5,755 3,200 5,755

Average number of employees 748 662 159 98

Number of employees at year-end 769 684 150 104

Management and a number of executives are members of a bonus and/or severance scheme.

Group Parent Company

Note 6 Other sales and administrative costs

USD '000 2009 2008 2009 2008

Total fees to elected auditors 564 647 223 264

Specified as follows:Statutory audit 395 453 121 147Tax advisory services 98 175 41 103Fee for other services 71 18 61 14


Notes


86

Note 8 Financial income

USD '000 2009 2008 2009 2008

Interest income on cash and deposits 5,355 14,564 3,478 4,810 Interest on receivables from subsidiaries - - 9,555 7,928 Total interest income on financial assets measured at amortised costs 5,355 14,564 13,033 12,739 Realised and unrealised currency exchange gains and losses, net 5,205 - 2,529 - Dividends received on shares at fair value through profit and loss 990 4,119 990 4,119 Interest on securities at fair value through profit and loss 328 1,016 328 1,016 Gain/loss on recognised firm commitments under fair value hedge accounting 3,568 (21,269) - - Gain/loss on financial derivatives under fair value hedge (3,568) 21,269 - - Profit on sales of shares in subsidiaries and Joint ventures - - - 7,232 Dividend received from subsidiaries - - - 150,000

Financial income 11,878 19,700 16,879 175,107


Note 7 Depreciations and write-downs

USD '000 2009 2008 2009 2008

Goodwill (1,735) - - - Vessels (55,994) (44,515) - - Vessels under construction (17,032) (96,890) - - Land and buildings (89) (44) - - Machinery and equipment (1,580) (1,113) (8) (8)

(76,428) (142,563) (8) (8)


Note 9 Financial expenses

USD '000 2009 2008 2009 2008

Interest expenses on loans (27,656) (24,571) (19,700) (18,151) Interest on debt to parent company - (166) - (166) Interest on debt to subsidiaries - - (250) (833) Total interest expenses on financial liabilities measured at amortised costs (27,656) (24,737) (19,950) (19,149) Realised and unrealised currency exchange gains and losses, net - (18,367) - (17,938) Realised and unrealised gains and losses on securities at fair value though P&L (733) (14,668) (733) (14,668) Impairment write-down of subsidiaries - - (73,756) -

Financial expenses (28,389) (57,772) (94,439) (51,755)



87

NotesNote 10 Tax

USD '000 2009 2008 2009 2008

Certain group companies are jointly taxed with subsidiaries to the commercial foundation Lauritzen Fonden.

Tax in the Income Statement consist of:Current tax 3,993 (6,200) 5,113 (5,743) Deferred tax (360) 1,598 (368) 1,555

Income tax 3,633 (4,603) 4,745 (4,188)

Tax on the result is specified as follows: Calculated 25% of result before tax (19,000) (39,834) 22,046 (25,427) Adjustment in foreign companies deviating from 25% tax 1,251 1,208 - - Tax effect of: Tonnage tax 4,235 40,645 - (1,660) Non-taxable items 7,282 (10,073) (22,793) 25,873 Adjustments previous year 5,626 (3,364) 5,492 (2,974) Net result in joint ventures 4,239 6,815 - -

3,633 (4,603) 4,745 (4,188)

Effective tax percent -5% 3% 5% 4%

Deferred tax on the Balance Sheet:Deferred tax 1 January 3,940 2,356 3,881 2,326 Exchange rate adjustments in foreign companies 0 (13) - - Tax on result (360) 1,598 (368) 1,555

Deferred tax 31 December 3,580 3,940 3,513 3,881

Deferred tax concerns:Taxable losses carried forward 3,580 3,940 3,513 3,881

3,580 3,940 3,513 3,881


3,580 3,940 3,513 3,881

Corporate tax payable can be specified as follows:Balance 1 January 5,937 549 4,911 (465) Exchange rate adjustments 163 (105) 295 (61) Paid during the year 4,133 (708) 5,255 (306) Provision for the year, incl. jointly taxed subsidiaries (3,993) 6,200 (5,113) 5,743

6,239 5,937 5,348 4,911

In 2005 the Danish based companies entered the Danish tonnage taxation system, the adoption of which is binding until at least2014. JL does not expect to leave the system and therefore no deferred tax provision is made on the assets or liabilities effectedby the Danish tonnage taxation system. If, however, JL should leave the Danish tonnage taxation system there could be adeferred tax liability of up to a maximum of USD 11m.


88

Note 11 Goodwill

USD '000 2009 2008 2009 2008

Cost as at 1 January 2,069 2,069 - - Additions during the year - - - -

Cost as at 31 December 2,069 2,069 - -

Write-down as at 1 January (335) (335) - - Write-down during the year (1,735) - - -

Write-down as at 31 December (2,069) (335) - -

Balance as at 31 December 0 1,735 - -


In 2004 JL acquired all the shares in Quantum Tankers A/S (now Lauritzen Tankers A/S), a company operating and managing product tankers, thereby adding a new business area to JL’s business portfolio. The carrying amount of the goodwill has been tested for impairment as at 31 December 2009 by testing the CGU for product tankers to which the goodwill was allocated. As the carrying amount of the CGU exceeded the recoverable amount of the CGU an impairment loss of USD 1.7m has been recognised. Reference is made to note 2 for further disclosure of the impairment test and impairment loss of the product tankers unit.

Note 12 Vessels

USD '000 2009 2008 2009 2008

Cost as at 1 January 720,189 630,152 - - Exchange rate adjustments in foreign companies 957 2,370 - - Additions during the year 731,137 408,550 - - Disposals during the year (115,727) (320,883) - -

Cost as at 31 December 1,336,557 720,189 - -

Depreciation and write-down as at 1 January (147,760) (143,914) - - Exchange rate adjustments in foreign companies (740) (2,130) - - Depreciation (42,768) (44,515) - - Write down during the year (13,226) - Disposals during the year 40,761 42,799 - -

Depreciation and write-down as at 31 December (163,732) (147,760) - -

Balance as at 31 December 1,172,824 572,429 - -

Hereof classified to assets held for sale *) 135,120 - - -

Insurance sum including interest against total loss 1,524,150 1,097,500 - -

*) As at 31 December one product tanker and one bulk carrier were classified as held for sale (2008: none). The vessels arerecognized at fair value less cost to sell and thereby resulted in write downs amounting to USD 5.2 mill (2008: USD 0m).



89

NotesNote 13 Land and buildings

USD '000 2009 2008 2009 2008

Cost as at 1 January 3,163 1,616 - - Exchange rate adjustments in foreign companies 17 (65) - - Additions during the year - 1,612 - -


Depreciation and write-down as at 1 January (154) (115) - - Exchange rate adjustments in foreign companies (3) 5 - - Depreciation during the year (89) (44) - -

Depreciation and write-down as at 31 December (246) (154) - -

Balance as at 31 December 2,934 3,009 - -


Note 14 Machinery, tools and equipment

USD '000 2009 2008 2009 2008

Cost as at 1 January 15,572 12,114 1,615 327 Exchange rate adjustments in foreign companies (4) 35 - - Additions during the year 6,694 5,599 - 1,288 Disposals during the year (1,440) (2,176) - -

Cost as at 31 December 20,821 15,572 1,615 1,615

Depreciation and write-down as at 1 January (4,412) (5,154) (192) (184) Exchange rate adjustments in foreign companies 108 (14) - - Depreciation during the year (1,580) (1,113) (8) (8) Disposals during the year 959 1,869 - -

Depreciation and write-down as at 31 December (4,925) (4,412) (200) (192)

Balance as at 31 December 15,896 11,160 1,415 1,423



90

Note 15 Vessels under construction

USD '000 2009 2008 2009 2008

Cost as at 1 January 794,480 495,886 - - Additions during the year 123,520 469,459 - - Disposal during the year *) (50,103) - Transfers to depreciable category (299,163) (170,865) - -


Write-down as at 1 January (96,890) - - - Write-down during the year **) (89,434) (96,890) - - Disposal during the year 28,652 - - - Reversal of write-down during the year 72,402 - - -

Write-down as at 31 January (85,270) (96,890) - -


Hereof classified to assets held for sale 38,589 39,049 - -

*) During the year contracts for building of four bulk carriers and one product tanker have been cancelled.

**) Contracts for building of one bulk carrier (Lauritzen Bulkers) has been classified as held for sale (2008: One Bulk carrier and fiveproduct tankers). The contracts have been measured at fair value less costs to sell. Write-downs relating to assets held for saleamount to USD 19.9m (2008: USD 37.4m).

Reference is made to note 2 for further disclosure on impairment testing.



91

NotesNote 16 Investments in subsidiaries

2009 2008

Lauritzen Bulkers A/S, Denmark 100.0% 100.0%Lauritzen Kosan A/S, Denmark 100.0% 100.0%Lauritzen Reefers A/S, Denmark 100.0% 100.0%Lauritzen Tankers A/S, Denmark 100.0% 100.0%Lauritzen Ship Owner A/S, Denmark 100.0% 100.0%Lauritzen Tankers Shipowner A/S, Denmark 100.0% 100.0%J. Lauritzen Inversiones (Chile) Ltda., Chile 100.0% 100.0%J Lauritzen (Japan) K.K., Japan 100.0% 100.0%J. Lauritzen Singapore Pte., Singapore 100.0% 100.0%J. Lauritzen UK Limited., UK 100.0% 100.0%KRK 4 ApS, Denmark 100.0% 100.0%Segetrans Argentina S.A., Argentina 100.0% 100.0%ShipInvest A/S, Denmark 100.0% 100.0%LB Shipowner A/S, Denmark 100.0% -LK Shipowner A/S, Denmark 100.0% -Lauritzen Offshore Services A/S, Denmark 100.0% -LT Shipowner A/S, Denmark 100.0% -

USD '000 2009 2008

Cost as at 1 January 771,755 701,708 Additions during the year 363 70,047

Cost as at 31 December 772,118 771,755

Accumulated impairment losses at 1 January (259,132) (259,132) Impairment during the year (73,756) -

Parent Company

Parent Company

Ownership

Accumulated impairment losses at 31 December (332,888) (259,132)

Carrying amount at 31 December 439,230 512,623


92

Note 17 Investments in Joint ventures

USD '000 2009 2008 2009 2008

Cost as at 1 January 105,338 68,742 - - Additions during the year 4,556 36,596 - - Disposal during the year (11,625) - - -


Revaluation as at 1 January 28,509 17,351 - - Exchange rate adjustments in foreign companies (0) 2 - - Dividends received (4,288) (20,666) - - Revaluations during the year 17,049 31,822 - - Disposal during the year 2,845 - - -

Revaluation as at 31 December 44,115 28,509 - -

Write-down as at 1 January (21,243) (21,243) - -

Write-down as at 31 December (21,243) (21,243) - -


Net Liabili-2009 Revenue Result Assets ties Net result Equity

In total 182,539 19,493 857,969 504,880 15,478 129,401 Internal profit 1,476 (8,259)

16,954 121,141 Negative equity set off against receivables - 179

16,954 121,321 Hereof associated companies amount to 67 333


Group share of

2008 Net Liabili-Revenue Result Assets ties Net result Equity

In total 251,684 54,474 811,244 485,752 17,077 122,339 Internal profit 10,184 (9,735)

27,261 112,604 Negative equity set off against receivables - 1,306 Provision for negative Equity - 4,388

27,261 118,298 Hereof associated companies amount to (22) 233

Group share of


93

Notes

Note 19 Equity

The authorized and issued share capital of J. Lauritzen A/S has remained unchanged in 2009 with 29 shares of DKK 50,000 or multiples of this.In relation to the restructuring of the corporate structure of Lauritzen Fonden (previously named JL Fondet) the shares of J. LauritzenA/S was allotted from LF Investment APS (formerly named Vesterhavet A/S) to Lauritzen Fonden. The allotment took effect as from24.08.2009.

The proposed dividend for 2009 amounts to USD 0 per share (2008: USD 0).

Note 20 Provisions

Provisions have been recognized to cover certain onerous charter parties and technical management agreements.The provisions are subject to changes in expected vessel earnings and operating costs. Reference is made to note 2 for furtherdisclusure on provisions for onerous contracts related to impairment test.

USD '000 2009 2008 2009 2008

Provision as at 1 January 106,769 20,295 - - Additional provision during the year 9,267 95,345 - - Used during the year (74,865) (7,855) - - Reversal of provision during the year (24,515) (1,016) - -

Provision as at 31 December 16,656 106,769 - -

Non current liabilities 3,517 31,442 - - Current liabilities 13,139 75,327 - -

Provision as at 31 December 16,656 106,769 - -


Note 18 Other receivables and Prepayments

USD '000 2009 2008 2009 2008

Non current 'Other receivables' 15,960 26,959 - - Current 'Other receivables' 64,448 115,467 23,842 36,717

Total Other receivables 80,407 142,426 23,842 36,717

Specification of Other receivables

Financial lease receivables *) 20,202 38,595 - - Financial derivatives 21,928 82,836 15,389 33,429 Other short-term receivables 38,277 20,995 8,454 3,288

Total Other receivables 80,407 142,426 23,842 36,717

*) In 2005 three (sublease) bareboat agreements were entered into. The agreements are treated as finance lease agreementswith maturity dates in 2010 and 2011 respectively. Reference is made to notes 21 and 24.The 2008 figures include a financial lease agreement related to a reefer vessel sold in 2007 on financial lease terms. In 2009the counterpart defaulted and vessel was redelivered to Lauritzen Reefers A/S and subsequently sold.

PrepaymentsPrepayments (not specified above) include USD 20.6m related to a bulk carrier charter agreement with a maturity of four years ofwhich USD 14.8m relates to charter periods later than 2010.



94

Note 21 Interest bearing debt

USD '000 2009 2008 2009 2008

Mortgage on vessels 792,870 372,690 503,651 295,000 Financial leasing 20,202 30,605 - - Subordinated loan *) 120,604 - 120,604 - Other debt 2,745 2,202 2,745 2,202

936,421 405,496 626,999 297,202

Market value of non current debt 941,867 411,852 626,999 297,202

Non current interest bearing debt at 1 January 405,496 41,001 297,202 791 Exchangerate adjustments 8,917 - 8,917 -Proceeds from loans 711,688 382,477 389,629 296,411 Repayments and redemption (189,681) (17,982) (68,749) - Balance as at 31 December 936,420 405,496 626,999 297,202 Long-term debt due for payment next year (53,809) (23,794) (13,033) -

Non current interest bearing debt 882,612 381,702 613,966 297,202

The instalments for next year are specified as follows:Mortgage on vessels 42,092 12,975 13,033 - Debt concerning financial leasing 11,717 10,819 - -

Current interest bearing debt 53,809 23,794 13,033 -

Due for payment between 1 and 5 yearsMortgage on vessels 356,584 98,054 202,702 48,334 Debt concerning financial leasing 8,485 19,786 - - Subordinated loan *) 120,604 - 120,604 - Other debt 2,745 2,202 2,745 2,202

488,417 120,042 326,051 50,536

Due for payment after more than 5 years:Mortgage on vessels 394,195 261,661 287,915 246,666

394,195 261,661 287,915 246,666 *) The loan is granted from LF Investment ApS and is subordinated to all other debts, liabilities and obligations.



95

NotesNote 22 Financial instruments and financial risks Financial risks relate to capital management risks (access to funding and liquidity) and in general to the financial markets (currency exchange rates, interest rates, stock market share prices) as well as credit risks (loss arriving from counterparts failure to fulfill its contractual obligations towards JL). The overall policies and objectives for financial risks are defined by JL’s Board of Directors. The overall policies and objectives are in general unchanged compared to 2008. Financial risk management only applies to underlying financial risks and hedging contracts are made to reduce these risks. Risks primarily relate to non-USD currencies, net interest rate and credit risks and access to the financial markets. Capital management risk The purpose of capital management is to ensure we have sufficient capital for our day-to-day operations and financial commitments. Managing capital requirements is an integral part of JL’s long-term financial planning and is included in our reporting system. The general guidelines on capital approved by the Board of Directors include requirements for the level of equity for the Group defined by minimum solvency ratio (35-40%) figures, predefined minimum liquidity (USD 50-200m) and the requirement for external funding to be drawn on or post delivery of vessels. Being wholly-owned by Lauritzen Fonden, JL pursues a prudent dividend policy that supports JL’s ability to grow its business organically. During periods of tight financial markets, as in 2008-09, dividends are suspended. Otherwise, JL normally pays dividends of up to 25% of JL’s share of profits. JL is strongly solvent. At year-end 2009, solvency was 52% down from the 59% reported at year-end 2008 due to a significant increase in the number of owned vessels. Prior to the financial crisis, JL had adopted a growth strategy for its own fleet and at year-end 2009, the order book amounted to approximately USD 1,656m (down from 2,400m at year-end 2008), with 38% being self-funded (32% end of 2008). The collapse of the financial sector in late 2008 and the subsequent collapse of shipping markets meant that a larger part of the newbuilding program had to be self-financed. Lauritzen Fonden confirmed its long-term commitment by granting JL a subordinated loan of initially USD 100m. By including the subordinated loan as equity share, the solvency ratio at year-end 2009 amounted to 57%. Capital requirement (equity and financing) are constantly assessed in various scenarios and sensitivity analyses. Even though JL had expected significant reductions in rates compared to 2007 and 2008, the strengths and the speed of the collapse of the shipping markets had not been included in our scenarios. In the light of the events following the collapse of the financial and the shipping markets, JL’s general capital guidelines and transparent financial management and reporting have demonstrated their prudence in helping JL maintain and increase the funding required for newbuilding program. Financing for JL’s investment program with deliveries stretching far into 2011 was confirmed. The average tenor of credit facilities is 6.2 years. For further details regarding drawn commitments please refer to Note 21. Liquidity risk Liquidity risk relates to the risk that JL will not be able to fulfill its financial obligations as they fall due. Liquidity is continuously monitored and assessed based on the expected EBITDA for the current year and years to come, the outstanding capex payments, the proceeds from committed and expected credit facilities and the future liabilities from existing and expected future credit facilities. This is done to ensure liquidity is adequate at all times. External financing is primarily based on credit facilities with a group of core banks and credit facilities with major banks guaranteed by ECA’s (Export Credit Agencies). With some banks JL have agreed to make margin payments if some predefined financial limits are met. Due to a decline in vessel values measured by brokers, JL has made additional security available for financial institutions in form of cash in order to counteract any potential breach of minimum value clauses in existing credit facilities (ref note 27). There have been no breaches of credit facilities. Furthermore, for multi-currency short-term financing needs, an unsecured overdraft facility of DKK 100m is at the Group's disposal. A maturity analysis of JL’s financial liabilities as per 31 December 2009 is shown below. A maturity analysis of the Group's/Parent's operational lease obligations is included in note 24b.


96

Note 22 Financial instruments and financial risks (continued)

Group 2009

USD '000 Carrying amount

Contractual cash flows

Within 1 year

Between 1 – 5 years

More than 5 years

Non derivative financial instruments: Mortgage on vessels, bank debt and other interest bearing debt *) (916,219) (1,015,776) (64,863) (645,168) (363,179)

Finance lease commitments *) (20,202) (21,021) (12,475) (8,546) -

Trade payable and other payables (75,685) (75,685) (75,685) - - Derivative financial instruments, liabilities at fair value:

Forward exchange contracts (4,215) (4,215) (442) (3,773) -

Interest rate swaps (5,497) (5,497) (1,257) (3,487) (752)

Bunker hedging contracts

FFA’s* *) (9,946) (9,946) (5,293) (4,653) -

Total at 31 December 2009 (1,031,764) (1,132,140) (160,015) (665,627) (363,931)

Group 2008



Within 1 year


More than 5 years

Non derivative financial instruments: Mortgage on vessels, bank debt and other interest bearing debt *) (374,892) (422,190) (21,303) (128,575) (272,313)

Finance lease commitments *) (30,605) (33,079) (12,475) (20,604) -

Trade payable and other payables (199,625) (199,625) (199,625) - - Derivative financial instruments, liabilities at fair value:

Forward exchange contracts (8,563) (8,563) (3,374) (5,190) -

Interest rate swaps (11,842) (11,842) (2,085) (7,090) (2,667)

Bunker hedging contracts (317) (317) (317) - -

FFA’s* *) (122,135) (122,135) (122,135) - -

Total at 31 December 2008 (747,979) (797,751) (361,314) (161,459) (274,980) *) Contractual cash flows include undiscounted interest payments based on interest levels at year end. **) FFA contracts in the money amounts to USD 10.3m (2008: USD 54.6m)


97

NotesNote 22 Financial instruments and financial risks (continued)

Parent company 2009



Within 1 year


More than 5 years


Trade payable and other payables (18,500) (18,500) (18,500)

Debt to affiliated companies (131,556) (131,556) (131,556) - - Derivative financial instruments, liabilities at fair value:

Forward exchange contracts (15,794) (15,794) (8,907) (6,887) -

Interest rate swaps (5,497) (5,497) (1,257) (3,487) (752)

Total at 31 December 2009 (798,346) (862,078) (188,498) (380,490) (293,089)

Parent company 2008



Within 1 year


More than 5 years


Trade payable and other payables (66,398) (66,398) (66,398) - - Debt to affiliated companies (45,882) (45,882) (45,882) - - Derivative financial instruments, liabilities at fair value:

Forward exchange contracts (3,374) (3,374) (3,374) - -

Interest rate swaps (11,842) (11,842) (2,085) (7,090) (2,667)

Total at 31 December 2009 (424,698) (466,581) (124,465) (82,358) (259,759) *) Contractual cash flows include undiscounted interest payments based on interest levels at year end. Market risks Except to the extent described below, JL does not apply hedge accounting to manage volatility in profit or loss stemming from the use of derivative financial instruments. Sensitivity information is calculated at the balance sheet date and comprises only sensitivity related to financial instruments. Therefore, the amounts disclosed do not necessarily give a complete picture of JL's risks related to the different categories of risks. Currency risk The Groups functional and reporting currency is USD and thus all amounts are recorded and reported in USD. By matching income and expenses and assets and liabilities the net currency risk is minimized leaving net positions to be focused on. It is JL’s policy to use derivative instruments to hedge the currency risks related to net non-USD cash flows from operating activities and investments. JL’s operating cash inflows are mainly in USD (85%) (2008: 89%) and costs are also mainly in USD (68%) (2008: 69%). The most important non-USD cost currency is DKK arising mainly from head office costs and Danish crew expenses and EUR mainly related to the technical management of vessels. Currency risk related to non-USD investments in ships relates to JPY and EUR.


98

Note 22 Financial instruments and financial risks (continued) The currency composition of the assets and liabilities at the balance sheet date corresponds in general to the currency composition of the operating cash inflows and outflows. Furthermore, the Group and the parent company have the following significant non-derivative assets and liabilities denominated in non-USD at the balance sheet date:

2009

2008

USD ’000 DKK NOK ZAR LVL

DKK NOK ZAR LVL

Shares available for sale 3,479 - - -

3,411 - - -

Shares at fair value through profit or loss - 2,584 - 3,819

2,615 1,671 11,053 5,990

Subordinated loan (120,604) - - -

- - - -

Bank deposit 119,266 - - -

- - - - The hedging strategy for operating costs is based on estimated annual net non-USD cash flows, i.e. 12-month rolling cash flow. It is JL’s policy to cover minimum 25% or the equivalent of three months forward by use of forward currency contracts. JL may hedge up to 100% net 12 month rolling non-USD operational cash flow to secure minimum budget exchange rates for DKK and EUR. Expenses in other insignificant currencies are not hedged. Hedge accounting is not applied to forward currency contracts related to future costs in non-USD currencies. The hedging strategy for non-USD cash flows regarding investments in ship new-buildings is based on two years rolling cash flows. It is JL’s policy to hedge non-USD payments on vessels at the earliest possible point in time when the average exchange rate used in a given board recommendation can be achieved at the payment due date. JL uses fair value hedge accounting on a Group level in respect of derivatives in connection with firm commitments for vessels under construction. At the balance sheet date, the Group has the following forward currency contracts connected to firm commitments and cash flow hedges:

2009 2008

Nominal Fair value Duration Nominal Fair value Duration

million USD '000 months million USD '000 months Firm Commitments Purchase of JPY *) 7,741 11,579 0-4 14,429 26,038 0-16 Purchase of EUR *) 35 (3,773) 0-24 35 (5,190) 0-36

Cash Flow Hedge Purchase of DKK**) 25 (978) 0-2 60 (315) 0-9 Purchase of EUR**) - - - 35 (3,019) 0-3

*) Hedge accounting applies to the forward currency contracts **) Hedge accounting does not apply to the hedging of cash flows, hence fair value adjustments are recognized in the Income statement over the duration period. The parent company does not have any hedge transactions related to firm commitments. The currency risk related to non-USD investments in shares at fair value through profit or loss are hedged if 1) no "large forward premium" exists in the market and 2) if the investment is viewed as a short term investment. At 31 December 2009, the Group has hedge transactions related to currency risks in investments denominated in NOK (2008: NOK and DKK). Hedge accounting is not applied to forward currency contracts related to investments in securities in non-USD currencies. To measure currency risk in accordance with IFRS 7, the sensitivity, measured as the change in fair value of future cash flows from financial instruments as a result of fluctuations in exchange rates on the balance sheet date, is calculated. Sensitivity towards fluctuations in non-USD currencies at the balance sheet date, everything else being equal, (after tax), based on a 10% increase in currency translation rates against USD (assuming 100% effectiveness):

Group Parent

USD '000 2009 2008 2009 2008

Net profit Equity Net profit Equity Net profit Equity Net profit Equity

DKK/USD 4,273 4,273 6,103 6,103 4,273 4,273 6,103 6,103

EUR/USD - - 4,934 4,934 - - 4,934 4,934

JPY/USD - - - - - - - -

NOK/USD 51 51 (646) (646) 51 51 (646) (646)

ZAR/USD - - 1,105 1,105 - - 1,105 1,105

LVL/USD 424 424 599 599 424 424 599 599

4,748 4,748 12,095 12,095 4,748 4,748 12,095 12,095 The effect of a 10% decrease in the above currency translation rates would result in corresponding losses.


99

Note 22 Financial instruments and financial risks (continued) Interest rate risk The Groups interest rate risk is determined from net interest bearing debt. It is JL’s policy to hedge risks related to changes in interest rates to limit the negative economic effect of changes in interest rates by converting variable interest rates to fixed interest rates. USD credit facilities with a maturity longer than three years may be hedged up to 100%. Other facilities, with maturity up to three years, are presently not hedged. JL will cover the net interest rate risk via forward rate agreements, interest rate swaps and related instruments if the interest rate is viewed as being advantageous. JL uses cash flow hedge accounting in respect of interest rate derivatives and the Group and the Parent have, at the balance sheet date, the following contracts classified as hedge transactions and will be recycled in the Income statement over the tenor of the hedged loans:

2009 2008

Nominal Fair value Duration Nominal Fair value Duration

Million USD '000 months million USD '000 months

Interest rate derivatives 255.656 (3,804) 58-72 153.160 (11,842) 0-95 JL's net interest bearing debt and hence, the exposure towards interest rate fluctuations can be illustrated as follows:

Group

2009 2008

Rate USD ‘000 Term (mths) USD ‘000

Term (mths)

Other non-current receivables Fixed 20,202 18 38,595 24

Portfolio Management, bonds Variable 6,700 0-16 10,000 0

Bank deposits Variable 205,011 0 144,370 0

Finance lease obligation Fixed (20,202) 18 (30,605) 24

Mortgage on vessels Variable (792,870) 1-143 (372,690) 1-97

Subordinated loan Fixed (120,604) 52 - -

Other loans Fixed (2,745) 36-60 (2,202) 48-60

Net interest-bearing debt (704,508) (212,532)

Term illustrates the underlying term of the interest rate as from the balance sheet date.

Parent

2009 2008

Rate USD ‘000 Term (mths) USD ‘000

Term (mths)

Portfolio Management, bonds Variable 6,700 0-16 10,000 0

Bank deposits Variable 171,867 0 38,159 0

Mortgage on vessels Variable (503,651) 1-96 (295,000) 19-97

Subordinated loan Fixed (120,604) 52 - -

Debt to affiliated companies Variable (131,556) 0-12 (45,882) 0-12

Other loans Fixed (2,745) 36-60 (2,202) 48-60

Net interest-bearing debt (579,989) (294,925)

Term illustrates the underlying term of the interest rate as from the balance sheet date. To measure interest rate risk in accordance with IFRS 7, the sensitivity, measured as the change in fair value of future cash flows from financial instruments as a result of fluctuations in interest rates on the balance sheet date, is calculated. Due to lack of reliable measures of sensitivity of share prices to interest rate changes, shares available for sale and shares at fair value through profit or loss are not included in the sensitivity calculations. Also, the calculation is made assuming a global change in interest rates and thus fair value effect in respect of forward currency contracts and similar derivatives is not considered.

Notes


100

Note 22 Financial instruments and financial risks (continued) The calculated after tax effect on financial instruments measured at fair value based on a 1% decrease in interest rates (assuming 100% effectiveness):

Group Parent

2009 2008 2009 2008

USD '000 Net profit Equity Net profit Equity Net

profit Equity Net profit Equity

Interest rate derivatives - (12,342) - (8,518) - (12,342) - (8,518) A 1% increase in interest rates would have a corresponding inverse effect. The sensitivity analysis above is not representative for the total effect on the income statement and equity of an annual change in interest rates as this would also affect interest expenses on loans with variable interest rates. The calculated after tax effect on finance cost of a 1% annual increase in interest rates in 2008 and 2009 (assuming 100% effectiveness):

Group

Parent

2009 2008

2009 2008

USD '000 Finance costs Finance costs

Finance costs Finance costs

Interest bearing debt with variable interests (5,372) (2,195)

(2,486) (1,877)

A 1% decrease in interest rates would have a corresponding inverse effect. Freight rates Forward Freight Agreements (FFAs) are used by JL in the ordinary course of business to hedge the Group's risk related to fluctuations in freight rates. JL does not apply hedge accounting to FFAs.

2009 2008

Days bought

Days sold

Settlement rate,

USD per day Days

bought Days sold

Settlement rate, USD per day

Bulk:

Handysize - - - 1,276 546 5,375 – 7,000

Handymax/Supramax 730 730 14,500 – 18,500 1,460 1,460 9,500 – 11,000

Panamax - - -

Capesize - - - 730 - 18,000

730 730 - 3,466 2,006 -

At 31 December 2009, the net fair value of the FFAs amounts to tUSD 365 (2008: tUSD (67,639)). The contracts' terms are 1-24 month (2008: 1-12 months). The sensitivity at the balance sheet date towards fluctuations in freight rates (after tax) based on a 10% increase in average freight rates per day amounts to:

2009 2008

USD ‘000 Net profit Equity Net profit Equity

Forward Freight Agreements 0 0 1,825 1,825 The effect of a 10% decrease in the above freight rates would result in corresponding losses. The parent company does not have FFAs at 31 December 2009 or 2008.


101

Note 22 Financial instruments and financial risks (continued) Oil price risk Bunker oil is a significant cost element for the Group, though oil price risk only relates to contracted cargo volumes not covered by BAF (Bunker Adjustment Factor). Generally, it is JL’s policy to hedge projected consumption of bunker oil needed for contracted cargo volumes not covered by BAF. Deci-sions on whether to hedge fully or partially are made periodically depending on future oil price trend forecasts. Hedge accounting is not applied to oil price contracts. As most of the fleet on the balance sheet date is contracted either in the spot market, re-leted or on T/C, JL's oil price risk is insignificant. This tendency is expected to continue during 2010. At year-end 2009 no future bunker oil consumption has been hedged (2008: 750 MT). The parent company does not enter into oil price contracts. Share price risk Share price risk arises from the listed shares classified as financial instruments at fair value through profit and loss. For shares classified as available for sale the risk is considered to be immaterial as these shares are primarily measured at cost. Summary quantitative information and sensitivity:

2009 2008

Carrying Sensitivity (+10%) Carrying Sensitivity (+10%)

USD ‘000 amount Net result Equity amount Net result Equity

Shares available for sale 3,479 - 348 3,411 - 341

Shares at fair value through profit or loss 6,455 646 646 25,192 2,519 2,519

Total 9,934 646 994 28,603 2,519 2,860 Sensitivity is measured at the balance sheet date and includes changes in equity prices only and is calculated after tax. A decrease in share prices would result in a corresponding loss. Amounts for the parent company are the same. Management of currency risks from non-USD investments in equity securities is described in the “Currency risk” section above. Credit risk Credit risk is the risk of incurring a financial loss if a customer or counterparty fails to fulfill its contractual obligations towards JL. JL evaluates customers for creditworthiness based on historical trading and payment records as well as industry knowledge and customer reputation. Further, customers and counterparties are accepted only when fulfilling JL's general requirements. In certain cases contracts are guaranteed by parent companies or similar. In 2009 provision for expected loss on trade receivables of USD 0m (2008: USD12m) has been recognized. At 31 December 2009 JL does not have any further overdue trade receivables (2008: USD 0m). The risks relating to financial instruments, bonds and cash funds are minimized by trading only with financial institutions with a long term credit rating from Moody’s of A2 for financial products with a maturity of less than one year and Aa3 for financial products with a maturity of more than one year. At year-end 2009, all but one of the financial counterparties have credit ratings higher than specified. JL's exposure to credit risks at the balance sheet date can be illustrated as follows:

Group Parent

USD '000 2009 2008 2009 2008

Other long-term receivables 41,057 26,959 - -

Trade receivables 10,249 17,161 - -

Financial derivatives 21,928 82,836 15,389 33,429

Other short-term receivables 38,277 32,631 8,454 3,288

Portfolio management, bonds 6,700 10,000 6,700 10,000

Cash and bank deposits 205,011 144,370 171,867 38,159

Maximum credit risk 323,222 313,957 202,410 84,876 The maximum credit risk corresponds to the carrying value of the individual assets.

Notes


102

Note 22 Financial instruments and financial risks (continued) Other long-term receivables are disclosed in note 18. JL has obtained collateral for the payments through transportation of rights to income from the vessel pool in which the vessels are managed. Further to the above, JL has non-monetary receivables related to payments on vessel under construction. Risks related to payments on vessels under construction are limited through agreements such as refund guarantees where Builders ability to deliver may be uncertain and limited installment payments. Categories of financial assets and liabilities The following categories of financial assets and financial liabilities are recognized in the balance:

Group Parent

USD '000 2009 2008 2009 2008

Financial assets at fair value through P/L *) 35,031 118,028 28,492 68,621

Loans and receivables**) 273,799 188,446 180,379 41,503

Available for sale financial assets**) 3,530 3,411 3,530 3,411

Financial liabilities at fair value through P/L *) (19,658) (130,798) (21,291) (3,374)

Financial liabilities measured at amortized cost**) (958,900) (420,255) (767,803) (356,626)

*) Include financial derivatives designated for hedge accounting **) The recognized amounts of financial asset and liabilities measured at amortized cost does no differ material from its fair value. Fair value hierarchy With exception of listed bonds and shares USD 13.3m (2008: USD 35.2m) (level 1) as disclosed in note 23 all financial instruments at fair value are measured based on observable market prices (level 2), directly as prices or indirectly derived from prices.

Cash at bank and in hand, receivables from credit institutions and lending The fair value is calculated by means of valuation models where all estimated and fixed cash flows are discounted using zero-coupon yield curves. The expected cash flows of the individual contract are based on observable market data, e.g. interest rate curves. When determining the fair value of floating rate loans, cash flows are estimated based on the forward rate curve.

Derivative financial instruments The fair value of derivative financial instruments is calculated by means of valuation models such as discounted cash flow models. The expected cash flows of the individual contract are based on observable market data, e.g. interest rate curves as well as foreign exchange rates.


103

NotesNote 23 Securities

USD '000 2009 2008 2009 2008

Listed bonds pledged as collateral 6,700 10,000 6,700 10,000 Listed shares at fair value 6,403 25,192 6,403 25,192

Securities 13,103 35,192 13,103 35,192

Securities are classified as financial instruments at fair value through profit or loss as the portfolio serves as a cash reserve inaccordance with JL's risk and investment strategy. The portfolio is regularly monitored and reported to management at fair value.


Note 24 Leasing

JL has entered into leases with mutually interminable lease periods. Leases can include options to renew, and some leases canalso include options to purchase. Exercise of purchase options is based on individual assessment. None of the leases comprisecontingent lease payments.

Note 24a Finance Leases (vessels)

JL as lessor of vessels

Lease Carrying Lease Carrying USD '000 payment Interest amount payment Interest amount

Within 1 year 12,475 758 11,717 13,927 2,170 11,757 Between 1 - 5 years 8,545 60 8,485 28,069 1,231 26,838

Total 21,020 818 20,202 41,996 3,401 38,595

Fair value 25,648 45,647

JL as lessee of vessels

Lease Carrying Lease Carrying payment Interest amount payment Interest amount

Within 1 year 12,475 758 11,717 12,475 1,656 10,819 Between 1 - 5 years 8,545 60 8,485 20,604 818 19,786

Total 21,020 818 20,202 33,079 2,475 30,605

Fair value 25,648 36,961

The parent company of JL does not have any finance leases in either 2009 or 2008.

Note 24b Operating Leases (vessels)

Group2009 2008

Group2009 2008


At the balance sheet date JL has the following contractually committed charter income

USDm.0 - 1 Year 1 - 5 Year > 5 Year 0 - 1 Year 1 - 5 Year > 5 Year

Time charter and bareboat contracts 205.5 759.9 714.3 196.1 768.1 588.8

At the balance sheet date JL has the following operational lease liabilities:


Time charter and bareboat contracts 236.4 613.6 142.8 273.6 702.7 225.0 Others 0.5 0.5 - 0.4 0.0 -

Total 236.9 614.1 142.8 274.0 702.7 225.0

The parent company of JL does not have any operating leases in either 2009 or 2008.

Number of vessels on time charter and bareboat contracts 2009 2008Bulk carriers 43 55 Gas carriers 4 6 Product tankers 8 7 Reefer vessels 1 4

Includes the number of vessels:JL has purchase options on at the balance sheet date 5 9 JL has options to extend on at the balance sheet date 3 18

Group2009 2008

Group2009 2008


104

Note 25 Adjustments

USD '000 2009 2008 2009 2008

Exchange rate adjustments 28,678 (30,134) 25,041 14,045 Profit on the sale of other assets (397) (7,325) - - Internal profit - Joint ventures (1,476) (10,184) - - Profit and loss on sale of tangible fixed assets (16,670) (146,489) - - Changes in provisions (90,113) 77,108 - -

(79,978) (117,024) 25,041 14,045


Note 24 Leasing

JL has entered into leases with mutually interminable lease periods. Leases can include options to renew, and some leases canalso include options to purchase. Exercise of purchase options is based on individual assessment. None of the leases comprisecontingent lease payments.

Note 24a Finance Leases (vessels)

JL as lessor of vessels

Lease Carrying Lease Carrying USD '000 payment Interest amount payment Interest amount

Within 1 year 12,475 758 11,717 13,927 2,170 11,757 Between 1 - 5 years 8,545 60 8,485 28,069 1,231 26,838

Total 21,020 818 20,202 41,996 3,401 38,595

Fair value 25,648 45,647

JL as lessee of vessels

Lease Carrying Lease Carrying payment Interest amount payment Interest amount

Within 1 year 12,475 758 11,717 12,475 1,656 10,819 Between 1 - 5 years 8,545 60 8,485 20,604 818 19,786

Total 21,020 818 20,202 33,079 2,475 30,605

Fair value 25,648 36,961

The parent company of JL does not have any finance leases in either 2009 or 2008.


Group2009 2008

Group2009 2008


At the balance sheet date JL has the following contractually committed charter income


Time charter and bareboat contracts 205.5 759.9 714.3 196.1 768.1 588.8

At the balance sheet date JL has the following operational lease liabilities:


Time charter and bareboat contracts 236.4 613.6 142.8 273.6 702.7 225.0 Others 0.5 0.5 - 0.4 0.0 -

Total 236.9 614.1 142.8 274.0 702.7 225.0

The parent company of JL does not have any operating leases in either 2009 or 2008.

Number of vessels on time charter and bareboat contracts 2009 2008Bulk carriers 43 55 Gas carriers 4 6 Product tankers 8 7 Reefer vessels 1 4

Includes the number of vessels:JL has purchase options on at the balance sheet date 5 9 JL has options to extend on at the balance sheet date 3 18

Group2009 2008

Group2009 2008

Note 26 Change in working capital

USD '000 2009 2008 2009 2008

Change in stocks (299) 348 - - Change in receivables 24,179 (41,957) (275,402) (45,038) Change in payables (103,152) 151,403 59,065 45,914

(79,272) 109,794 (216,337) 876



105

Note 27 Cash and cash equivalents at end of year

USD '000 2009 2008 2009 2008

Cash and bank deposits 205,011 144,370 171,867 38,159 205,011 144,370 171,867 38,159

Cash and cash equivalents pledged as security for debt (32,950) - (20,300) - Cash and cash equivalents at end of year 172,061 144,370 151,567 38,159


Note 28 Mortgages

USDm 2009 2008 2009 2008

Debt for a total of 793 373 504 295 has been secured by mortgage in assets at the following book values:

Vessels 1,129 466 701 360 Cash and cash equivalents 33 - 20 -

1,162 466 721 360

As collateral security for the finance leasing liabilitythe following security has been provided:

Pledged bonds with credit institutions 7 10 7 10


Note 29 Contingent liabilities

USDm 2009 2008 2009 2008

Guarantees undertaken for debt in subsidiaries - - 263 - Guarantees undertaken for debt in Joint ventures 6 6 4 4 Maximum obligation to pay in capital into Joint ventures 43 68 - - Guarantees regarding newbuildings 104 281 104 155

Certain claims have been raised against JL. The judgment of the management is that the outcome of these claims will not have anymaterial impact on JL's financial position.

JL has issued certain guarantees in connection with the sale of assets.


Note 30 Contractual commitments

JL has entered into newbuilding contracts with a remaining contractual commitment of USD 1,018.1 million. These contracts coverthe construction of 21 bulk carriers, 6 gas carriers, 10 product tankers, 2 shuttle tankers due for delivery in 2010, 2011, 2012 and2013. In addition JL has a purchase obligation of USD 28.4 million covering one second hand vessel for delivery in 2010.

Notes


106

Note 31 Related parties

As owners of J Lauritzen A/S the commercial foundation Lauritzen Fonden and its subsidiaries are related parties.

Other related parties with a significant influence of the activities of J Lauritzen A/S is the company's Board ofDirectors and the Executive Management (Key management personel).

Finally, additional related parties comprise those subsidiaries and Joint ventures (ref. notes 16 and 17) inwhich J Lauritzen A/S has a controlling or significant influence. Subsidiaries and Joint ventures togetherwith J Lauritzen's shareholding is shown in the Group Structure on pages 108 - 109.

Transactions with subsidiaries, Joint ventures and other related parties are conducted at arms length andhave comprised the following:

Group Parent companyUSD '000 2009 2008 2009 2008

Management fee, income/(expenses) from group companies - - 12,060 6,524 Management fee, income/(expenses) from LF Investment ApS 165 107 165 107 Currency hedging income/(expenses) from group companies - - (399) (298) Guarantee commission income/(expenses) from group companies - - 753 - Rental and lease income/(expenses) from group companies - - 1,135 1,388 Rental and lease income/(expenses) from LF Investment ApS (2,038) (2,364) (2,038) (2,364) Paid dividend to parent company - (85,368) - (85,368) Received dividend from group companies - - - 150,000

Transactions with subsidiaries are eliminated in the group accounts in accordance with the accounting policies.Receivables, debt and interest to and from related parties are shown in the balance sheet and notes 8 and 9.There have been no other transactions with related parties other than those stated above.Consideration to key management personnel is disclosed in note 5.

Note 32 Events after the balance sheet date

There have been no events after the balance sheet date that could materially affect the accounts as presented.

Note 33 New accounting regulations

The IASB have issued the following new or revised accounting standards and interpretations, that are not compulsory for JL inthe preparation of the annual report for 2009: IFRS 3, amendments to IAS 27, further amendments to IAS 32 and 39 and IFRIC9, amendments to IFRS 2, amendments to IFRS 1, part of "improvements to IFRSs (May 2008)", "Improvements to IFRSs (April2009)", IFRIC 17-19, amendment to IFRIC 14, revised IAS 24 and IFRS 9. Amendments to IFRS 2, amendments to IFRS1, Improvements to IFRS (April 2009), IFRIC 19, amendment to IFRIC 14, revised IAS 24 and IFRS 9 have not yet beenendorsed by the EU.

J. Lauritzen A/S expects to implement the standards and interpretations, when they become compulsory for JL.None of the new standards and interpretations is expected to have material effect going forward.


107

Overall group structure

Denmark100%

LKT Gas Carriers Pte. Ltd.Singapore

Milau Pte LtdSingapore

Serviços Ltda.

Lauritzen Ship Owner

J. Lauritzen

Denmark

J. Lauritzen Japan K.K.

100%

100%

LB Ship Owner A/S

100%

LK Ship Owner A/S

100%

Dan Swift do Brasil

Shoreoff Invest Bermuda

Lauritzen Kosan A/S

100%

100%

Lauritzen Reefer A/SDenmark

100%

100%

Dan Swift Netherland B.V.

Denmark

Hong Kong SAR

50%

Private Limited, India

Lauritzen Tankers

25%

100%Ship Owner A/S

100%

100%

Hong Kong SAROwneast Shipping Ltd.

Greden Ltd.

Freja Sirius A/S

33%

LauritzenbluecDenmark

Denmark25%

Freja Polaris A/SDenmark

Lauritzen Offshore Services A/S

100%

50%

Quantum Tankers A/S

J. Lauritzen A/SDenmark

Lauritzen Tankers A/S

100%Denmark

100%

100%

Denmark

J. Lauritzen (USA) Inc.

Lauritzen Bulkers A/S

33,3%

50%

Gasnaval S.A.Spain

100%Shanghai Co. Ltd.

Unigas Kosan Ltd.Hong Kong SAR

Japan30%

Star Management Ass.

100%

East Gate Shipping Ltd

Lauritzen Kosan

LT Ship Owner A/S

100%

100%Bahamas

Labas (Bahamas) Ltd.

100%

Zuper Logistics

Shipinvest A/S

JL GROUP STRUCTURE 31 DECEMBER 2009

50%

Singapore Pte. Ltd.50%

100%

Singapore Pte. Ltd.100%

Good Hope Overseas Mngmt.

100%

100%

Dan Swift Pte. Ltd.Singapore

Handyventure

25%Panama

LBS Shipowner Pte. Ltd

Singapore Pte. Ltd.

Lauritzen Offshore Services Singapore Pte. Ltd.

100%

Lauritzen Shuttletankers

100%

F:\regnsk_rapporter\2009\Annual report\Excel files\JL Group Structure 2009 12 31 til årsrapporten Side 1


108

List of group companiesCompany name Country Ownership %

J. Lauritzen A/S Denmark -Segetrans Argentina S.A. Argentina 100 Greden Limited Bahamas 100 Labas (Bahamas) Ltd. Bahamas 100 Shoreoff Invest Bermuda Ltd. Bermuda 100 Dan Swift do Brasil Serviços Ltda Brazil 100 Frio Grande do Norte Ltda. ** Brazil 33 J. Lauritzen Inversiones (Chile) Ltda. Chile 100 East Gate Shipping Ltd. China 100 J.Lauritzen Shanghai Co. Ltd China 100 Owneast Shipping Limited China 100 Unigas Kosan Ltd. * China 50 Freja Sirius A/S * Denmark 25 Freja Polaris A/S * Denmark 25 ID Handysize A/S * Denmark 40 KRK 4 ApS Denmark 100 KRK 4a ApS Denmark 100 K/S Bulkinvest 30 * Denmark 18 K/S Danred I * Denmark 44 K/S Danred II * Denmark 40 K/S Danred III * Denmark 35 K/S Danred IV * Denmark 30 K/S Danskib 30 * Denmark 10 K/S Danskib 34 * Denmark 20 K/S Danskib 63 * Denmark 14 K/S Danskib 68 * Denmark 40 K/S Danskib 69 * Denmark 40 K/S Danskib 72 * Denmark 20 K/S Danskib 73 * Denmark 33 K/S Danskib 74 * Denmark 40 K/S Danskib 77 * Denmark 20 K/S Handybulk * Denmark 34 LauritzenBlueC A/S * Denmark 33 Lauritzen Bulkers A/S Denmark 100 Lauritzen Kosan A/S Denmark 100 Lauritzen Offshore Services A/S Denmark 100 Lauritzen Reefers A/S Denmark 100 Lauritzen Ship Owner A/S Denmark 100 Lauritzen Tankers A/S Denmark 100 Lauritzen Tankers Ship Owner A/S Denmark 100 LB Ship Owner A/S Denmark 100 LK Ship Owner A/S Denmark 100 LT Ship Owner A/S Denmark 100 Quantum Tankers A/S *** Denmark 50 Shipinvest A/S Denmark 100 Zuper Logistics Private Limited ** India 33 J. Lauritzen (Japan) K.K. Japan 100 Star Management Associates ** Japan 30 Good Hope Overseas Management Inc. ** Panama 25 Dan Swift Netherland B.V. The Netherlands 100 Dan Swift (Singapore) Pte. Ltd. Singapore 100 Handyventure Singapore Pte. Ltd. * Singapore 50 J. Lauritzen Singapore Pte. Ltd. Singapore 100 Lauritzen Offshore Services Singapore Pte. Ltd. Singapore 100 Lauritzen Shuttletankers Singapore Pte. Ltd. Singapore 100 LBS Shipowner Pte. Ltd. Singapore 100 LKT Gas Carriers Pte. Ltd. * Singapore 50 Milau Pte. Ltd. * Singapore 50 Gasnaval S.A. Spain 100 J. Lauritzen UK Limited UK 100 J. Lauritzen (USA) Inc. USA 100

* Joint venture** Associated company*** Treated as subsidiary as JL has more than 50% of the voting rights


109

Management statement

Jan Kastrup-NielsenExecutive Vice President

Ingar Skaug, Vice Chairman

Niels Heering

Søren Berg*

Per Gommesen*

Executive Management

Torben JanholtPresident & CEO

Birgit Aagaard-SvendsenExecutive Vice President & CFO

Board of Directors

Bent Østergaard, Chairman

Peter Poul Lauritzen Bay

Vagn Rosenkilde

Ulrik Danstrøm*

* Elected by the employees

The Board of Directors and Executive Management have today discussed and approved the annual report of J. Lauritzen A/S for the financial year 2009.

The annual report has been prepared in accordance with Inter-national Financial Reporting Standards as adopted by the EU and additional disclosure requirements in the Danish Financial Statements Act. It is our opinion that the consolidated finan-cial statements and parent company financial statements give a true and fair view of the Group’s and the parent company’s fi-nancial position at 31 December 2009 and of the results of the

Group’s and the parent company’s operations and cash flows for the financial year 1 January – 31 December 2009.

Further, in our opinion, the Management’s review gives a fair re-view of the development in the Group’s and the parent compa-ny’s operations and financial matters, the results of the Group’s and the parent company’s operations and financial position and describes the material risks and uncertainties affecting the Group and the parent company.

We recommend that the annual report be approved at the An-nual General Meeting

Copenhagen, 16 March 2010


110

The independent auditor’s report

consider internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements and the parent company financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonable-ness of accounting estimates made by Management, as well as evaluating the overall presentation of the consolidated financial statements and the parent company financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.Our audit did not result in any qualification.

OpinionIn our opinion, the consolidated financial statements and the par-ent company financial statements give a true and fair view of the Group’s and the parent company’s financial position at 31 Decem-ber 2009 and of the results of the Group’s and the parent com-pany’s operations and cash flows for the financial year 1 January – 31 December 2009 in accordance with International Financial Reporting Standards as adopted by the EU and additional disclo-sure requirements in the Danish Financial Statements Act.

Statement on the Management’s reviewPursuant to the Danish Financial Statements Act, we have read the Management’s review. We have not performed any other procedures in addition to the audit of the consolidated financial statements and the parent company financial statements. On this basis, it is our opinion that the information given in the Manage-ment’s review is consistent with the consolidated financial state-ments and the parent company financial statements.

Copenhagen, 16 March 2010

KPMGStatsautoriseret Revisionspartnerselskab

Kurt Gimsing State Authorised Public Accountant

Henrik Kronborg IversenState Authorised Public Accountant

To the shareholders of J. Lauritzen A/SWe have audited the consolidated financial statements and the parent company financial statements of J. Lauritzen A/S for the financial year 1 January – 31 December 2009, pp. 68-109. The consolidated financial statements and the parent company finan-cial statements comprise income statement, statement of com-prehensive income, balance sheet, equity statement, cash flow statement and notes for the Group as well as for the parent com-pany. The consolidated financial statements and the parent com-pany financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional disclosure requirements in the Danish Fi-nancial Statements Act.In addition to our audit, we have read the Management’s review prepared in accordance with the Danish Financial Statements Act and issued a statement in this regard.

Management’s responsibilityManagement is responsible for the preparation and fair presenta-tion of the consolidated financial statements and the parent com-pany financial statements in accordance with International Finan-cial Reporting Standards as adopted by the EU and additional disclosure requirements in the Danish Financial Statements Act. This responsibility includes: designing, implementing and main-taining internal control relevant to the preparation and fair pres-entation of consolidated financial statements and parent compa-ny financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Further, it is the responsibility of Management to prepare a Management’s review that gives a fair review in accordance with disclosure requirements in the Danish Financial Statements Act.

Auditors’ responsibility and basis of opinionOur responsibility is to express an opinion on the consolidated fi-nancial statements and the parent company financial statements based on our audit. We conducted our audit in accordance with Danish Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the au-dit to obtain reasonable assurance whether the consolidated fi-nancial statements and the parent company financial statements are free from material misstatement. An audit involves perform-ing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements and the par-ent company financial statements. The procedures selected de-pend on the auditors’ judgement, including the assessment of the risks of material misstatement of the consolidated financial state-ments and the parent company financial statements, whether due to fraud or error. In making those risk assessments, the auditors


111

Board of Directors

Bent Østergaard, ChairmanPresident, LF Investment ApS & Lauritzen Fonden

Chairman of the Board of Directors of:DFDS A/SKayxo A/SFrederikshavn Maritime Erhvervspark A/SNanoNord A/SCantion A/SFonden Kattegat Silo

Board member of:Million Brains A/SMama Mia Holding A/SRoyal Arctic Line A/SWith FondenDurisol UK

Ingar Skaug, Vice ChairmanGroup Chief Executive OfficerWilh. Wilhelmsen ASA

Board member of:Berg-Hansen Reisebureau ASCenter for Creative LeadershipDFDS A/SMirosWallenius Wilhelmsen LogisticsWilh. Wilhemsen ASAWilhelmsen Maritime ServicesPetroleum Geo-ServicesEUKORGard P & IBery Maritime

Peter Poul Lauritzen Bay Lean DirectorCarlsberg Breweries A/S

Vagn Rosenkilde Chairman of the Board of Directors of:Bramming Plast Industri A/S Enkotec Holding A/S - Enkotec A/S Erik Blacha Holding A/S - Carl Andersen Motorcykler A/S Norisol A/S SKAKO Industries A/S Niels Heering Chairman of the Board, partnerGorrissen Federspiel

Chairman of the Board of Directors of:Ellos A/SEQT Partners A/SHelgstrand Dressage A/SJeudan A/S Nesdu A/SNTR Holding A/SStæhr Holding A/S

Board member of:Ole Mathiesen A/SScandinavian Private Equity Partners A/SRoskilde Bank A/S (appointed by theNational Bank of Denmark)

Søren Berg*Project Manager, Lauritzen Kosan A/S

Ulrik Danstrøm*Vice President, Lauritzen Bulkers A/S

Per Gommesen*Captain, Lauritzen Offshore Services

* Elected by the employees


112


113

Management

From left: Anders Mortensen, Birigit Aagaard-Svendsen, Torben Janholt, Jan Kastrup-Nielsen and Ejner Bonderup.


114

EXECUTIVE MANAGEMENTTorben Janholt President & CEO

Board member of:Danish Shipowners’ Association (DSA)(Chairman of DSA 2005-09)A/S United Shipping & Trading LtdPost Norden AB ECSA - European Community Shipowners’ Associations

Birgit Aagaard-Svendsen Executive Vice President & CFO

Board member of:Danske Bank A/SMetroselskabet I/S

Jan Kastrup-NielsenExecutive Vice President

MANAGEMENT - BUSINESS UNITSJan Kastrup-NielsenPresidentLauritzen Kosan & Lauritzen Tankers

Ejner BonderupPresidentLauritzen Bulkers

Anders MortensenPresidentLauritzen Offshore Services


115

Company details

Address J. Lauritzen A/S28, Sankt Annae PladsPO Box 2147DK-1291 Copenhagen K

Telephone: (+45) 3396 8000Fax: (+45) 3396 8001 Web: www.j-l.comE-mail: [email protected]

Company Registration Number (CVR)55 70 01 17

AuditorsKPMGBorups Allé 177DK-2000 Frederiksberg

Financial year: 1 January – 31 December


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Leading carrier of liquefied gases, including petrochemical gasses such as ethylene, energy gases (LPG) and ammonia. At the end of 2009, Lauritzen Kosan controlled a combined fleet of about 50 semi- refrigerated/ethylene and fully pressu-rised gas carriers in the 3,000-10,000 cbm segment.The controlled fleet will increase by six newbuildings over the next few years.

Provider of dynamically positioned (DP) support vessels for the offshore industry. Towards the end of 2009, Lauritzen Off-shore Services took delivery of Dan Swift, an innovative, tech-nologically advanced DP2 (2nd generation) Accommodation and Support vessel. The fleet also comprises the DP2 shuttle tanker Dan Eagle.The fleet will see the addition of two additional DP2 shuttle tankers in 2011.

Major operator of bulk carriers engaged in ocean transport of dry bulk cargoes world-wide. At the end of 2009, Lauritzen Bulkers controlled a combined fleet of about 80 Handysize, Handymax, Panamax and Capesize bulk carriers. The controlled fleet will increase by some 40 vessels in com-ing years.

Global provider of ocean transport for oil products ranging from vegetable oils to petroleum products, fuel oils, and chemicals. At year-end 2009, Lauritzen Tankers controlled ten modern, double-hulled, medium range (MR) product tankers. The fleet will increase by nine newbuildings in the next few years.


117

www.j-l.com

HEAD OFFICEJ. Lauritzen A/S28, Sankt Annae PladsPO Box 2147DK-1291 Copenhagen KPhone: +45 3396 8000Fax: +45 3396 8001Email: [email protected]

OVERSEAS OFFICES:

BRAZILDan Swift do Brasil Serviços LtdaEd. Argentina Praia de Botafogo, 228 sala 604Brazil CEP 22.250-040 Phone: +55 21 3266 1550Email: [email protected]

CHINAJ. Lauritzen Shanghai Co. Ltd.Unit 2306, Chong Hing Finance Cen-tre No. 288 Nanjing Road West Huangpu District, Shanghai CHINA 200003 Phone: +86 21 6358 0066Fax: +86 21 6358 0077Email: [email protected]

HONG KONGUnigas Kosan Limited 1006 Tower 2Lippo Centre89 QueenswayAdmiraltyHong KongPhone: +852 3102 5577Fax: +852 3102 0577Email: [email protected]: www.unigas-kosan.com

JAPANJ. Lauritzen (Japan) K.K. Kioicho Building 3 A, 3-12 Kiochio Chiyoda-ku Tokyo 102-0094 Japan Phone: +81 3 3237 7431Fax: +81 3 3237 7858Email: [email protected]

OWNERLauritzen Fonden28, Sankt Annae Plads DK- 1291 Copenhagen KPhone: +45 3396 8425Fax: +45 3396 8434 Email: [email protected]: www.lauritzenfonden.com

PHILIPPINESLauritzen Kosan Manila Officec/o Crossworld Marine Services Inc.7th Floor, Sage HouseV.A. Rufino StreetLegaspi Village, Makati City 1233Phone: +63 2750 5268Fax: +63 2892 7242Email: [email protected]

SINGAPOREJ. Lauritzen Singapore Pte. Ltd. 1 Harbour Front Avenue #15-08 Keppel Bay Tower Singapore 098632 Phone: +65 6275 8000Fax: +65 6275 7208Email: [email protected]

SPAINGasnaval S.A. PAE Ibarrabarri Edificio A-1 Avda. Sabino Arana 18 E-48940 Leioa, Vizcaya Spain Phone: +34 94 479 5600Fax: +34 94 416 7316Email: [email protected]

USAJ. Lauritzen (USA) Inc. 4 Landmark Square, Suite 150 Stamford, CT 06901 USA Phone: +1 203 961 8661Fax: +1 203 964 0350Email: [email protected]

Documents

Annual Report 2009 - static.j-l.comstatic.j-l.com/imce/annual_report_2009.pdf · Brazil, China, Japan, the Philippines, Singapore, Spain, and ... J. Lauritzen A/S, Annual Report 2009